On today’s TSX Breakouts report, there are 58 stocks on the positive breakouts list (stocks with positive price momentum), and 30 stocks are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a company that may resurface on the positive breakouts list.
This stock was first profiled in the Breakouts report last year.
In 2018, the share price rallied over 109 per cent and year-to-date the stock price is up 85 per cent. The three analysts covering this stock all have “buy” recommendations with an average target price that suggests the share price may rally another 29 per cent over the next year. The share price can be volatile at times, and consequently the stock may be best suited for consideration by investors with a high risk tolerance.
The security highlighted today is Viemed Healthcare Inc. (VMD-T).
A brief outline is provided below that may serve as a springboard for further fundamental research and due diligence that should be conducted before investing in a security.
Viemed is a provider of home respiratory care medical services with operations in 27 U.S. states.
The company provides at-home sleep apnea testing and treatment. However, its core business is focused on providing non-invasive ventilation (NIV) therapy and home treatment for individuals with respiratory conditions, primarily targeting individuals suffering from Chronic Obstructive Pulmonary Disease (COPD).
Management’s objective is to continue to grow its client base, expand its product offerings and enter into additional U.S. states. The company generates revenue through recurring monthly fees with the average monthly cost of US$950. This monthly rental fee is reimbursed through insurance and covered by Medicare.
The top 10 providers in the NIV industry serve approximately 60 per cent of the market. Viemed is the third largest provider with an estimated 8 per cent market share.
On May 6, the company released its first-quarter financial results.
Revenue came in at US$20.4-million, up 45 per cent year-over-year. Gross margins were 75 per cent, unchanged from the same period last year. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was US$4.8-million, up 27 per cent year-over-year. Adjusted EBITDA margin stood at 23 per cent, down from over 26 per cent reported last year. However, management expects the annual adjusted EBITDA margin to be relatively stable and in-line with prior years. During the first-quarter, the company repurchased 365,100 shares as part of its share buyback program.
Looking forward, management expects to report revenue of between US$22.2-million and US$22.8-million in the second-quarter with similar margins (gross and EBITDA) compared to the previous year. The consensus revenue estimate is conservative at US$21.4-million.
On the earnings call, chief executive officer Casey Hoyt commented on his geographical expansion objective, noting that they are now licensed to provide services in 40 U.S. states with Medical approval in 31 states, and “expect(s) to be in the lower 48 (states) in the next one and a half years, expect to be in another dozen or so by, hopefully, the next two quarters."
When asked about entering larger markets such as the state of California and Florida, Mr. Hoyt remarked, “California… it’s underway. We just have one rep, but we’re looking at other pockets in the state to expand into. Florida, … it’s been difficult to get into that state, but it will happen at some point so I don’t have a time line for you there.”
A product offering that is experiencing strong growth is the percussion vest, representing approximately 7 or 8 per cent of the company’s revenue in the first-quarter. The CEO expects this vest to ramp up to between 10 per cent and 15 per cent of the company’s revenue by the end of the year.
In May 2018, the stock graduated to the Toronto Stock Exchange from the TSX Venture Exchange. Management aims at also being listed on a U.S. Exchange within the next two years.
Insiders own approximately 11 per cent of the shares outstanding.
This stock may be best suited for consideration by investors with a high risk tolerance within a diversified portfolio as the share price can be volatile at times.
For instance, on Nov. 20, 2018, the share price plunged 30 per cent in a single day with over 2 million shares traded.
Management issued a news release stating, “that it is not aware of any material undisclosed information in the business, operations or affairs of the Company that may be contributing to the level of trading activity of its shares on the Toronto Stock Exchange. The Company suspects that the activity could be related to a recent report that Centers for Medicare and Medicaid Services (CMS) is considering adding various codes to the next round of the Competitive Bidding Program (CBP), one of which is ventilators. The Company will be submitting comments to CMS in the normal course of business. Comments are due to CMS by December 3, 2018. The Company does not believe that ventilators should be included in the CBP. Additionally, the Company is aware that the CBP has been temporarily suspended starting January 1, 2019, therefore, any changes should not be effective until January 1, 2021, at the earliest.”
The company does not pay its shareholders a dividend.
This health care stock with a market capitalization of $366-million is covered by three analysts and all three analysts have “buy” recommendations.
The firms providing research coverage on the company are as follows in alphabetical order: Acumen Capital, Beacon Securities, and Lake Street Capital Markets.
In May, Doug Cooper, the analyst at Beacon Securities, raised his target price to $12.50 from $10.50.
The Street is anticipating the company to report revenue of US$86-million in 2019, up from US$65-million reported in 2018, and reach US$108-million in 2020. The consensus EBITDA estimates are US$21.1-million in 2019, up from US$17.2-million reported in 2018, and US$26.9-million in 2020. The consensus earnings per share estimates are 28 US cents in 2019 and 41 US cents for 2020.
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 6.7 times the 2020 consensus estimate.
The average target price is $12.50, implying the share price has 29 per cent upside potential over the next 12 months. Individual target prices are as follows in numerical order: $12, $12.50 and $13.
Insider transaction activity
The most recent trades reported by insiders occurred in January. The following transactions all took place on January 4.
Chief executive officer and co-founder Casey Hoyt exercised his rights, receiving 102,000 shares, and sold 32,625 shares at a price per share of $5.47, leaving 2,003,293 shares in his portfolio.
President and co-founder Mike Moore exercised his rights, receiving 99,243 shares, and sold 31,808 shares at a price per share of $5.47 with 1,948,842 shares remaining in his account.
Chief operating officer Todd Zehnder exercised his rights, receiving 96,487 shares, and sold 44,601 shares at a price per share of $5.47 with 61,886 shares left in his account.
Chief financial officer Trae Fitzgerald exercised his rights, receiving 28,303 shares and sold 12,475 shares at a price per share of $5.47 with a remaining account balance of 15,828 shares.
There is little trading history given that this stock just began trading on the TSX Venture Exchange on December 22, 2017. Consequently, technical analysis is limited.
Year-to-date, the share price has nearly doubled in value, rising over 85 per cent, and is 6 per cent away from its all-time closing high. If the stock was included in the S&P/TSX composite index, it would be the sixth best performing stock out of the 239 constituents in the index and the best performing stock in the S&P/TSX health care sector index.
Looking at key resistance and support levels, the stock has a ceiling of resistance around $10.35, near its record closing high of $10.33 set back on June 10. Looking at the downside, there is technical support around $9.50, near its 50-day moving average (at $9.46).
Trading volume can be low, which can create share price volatility. The three-month historical daily average trading volume is approximately 168,000 shares.
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.