On Friday, Benchmark analyst lowered the price target on shares Quipt Home Medical (TASE:PMCN) Corp. (NASDAQ:QIPT) to $6.00 from the previous $7.00 while keeping a Buy rating on the stock.
The adjustment comes after the company reported a 1% sequential revenue growth in its fourth fiscal quarter, though InvestingPro data shows impressive year-over-year revenue growth of 16.17% and a strong gross margin of 71.97%.
This mild increase was attributed to the company's ability to boost volumes enough to counteract negative factors such as the expiration of Medicare's 75/25 rate relief on January 1, 2024, and a reduced contract with Humana (NYSE:HUM) (HUM-NR).
The company's adjusted EBITDA for the quarter was down 9% year over year at $13.4 million. This decline was due to inventory adjustments, heightened healthcare expenses, and diminished scale. Despite these challenges, Quipt Home Medical's management anticipates a return to its long-term organic growth target of 8%-10% by the second half of fiscal year 2025.
According to InvestingPro's analysis, the company maintains a GREAT financial health score of 3.08, suggesting strong fundamentals despite current headwinds. Subscribers can access 5 additional ProTips and comprehensive financial metrics in the Pro Research Report. This projection is based on continued volume growth and anticipated positive CPI adjustments in the CMS 2025 fee schedule ranging from 2.4% to 3.0%.
Quipt Home Medical has not experienced any demand reduction for its sleep therapy and supplies, which make up 50% of its revenue, as a result of GLP-1 medications. The company's management also noted an increasingly active mergers and acquisitions pipeline, which could potentially enhance the company's business model.
The revised price target of $6.00 reflects a new enterprise value to EBITDA (EV/EBITDA) multiple of 5.2x for the calendar year 2025. This valuation is consistent with Quipt Home Medical's closest peers and represents a discount compared to the valuation of the impending acquisition of Rotech Healthcare by Owens & Minor (OMI-NR).
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