On Tuesday, Citi initiated coverage on Auna SA (NYSE: AUNA), a healthcare provider in South and Central America, with a Buy rating. The firm set a price target of $14.00 per share for the company, citing multiple growth drivers that could benefit Auna in the near future.
Auna, which has recently expanded into Mexico in 2022, is seen as well-positioned to take advantage of several secular growth factors. These include low private healthcare penetration, an insufficient number of hospital beds relative to the population, and an aging demographic across the region. The expansion not only increases Auna's total addressable market but also aligns the company with the ongoing nearshoring boom, potentially enhancing both margins and return on invested capital (ROIC).
Despite the stock currently trading at 35% below its initial public offering (IPO) price, Citi believes the current valuation, at approximately 10.3 to 6.4 times the 2024/2025 estimated price-to-earnings (P/E) ratio, does not fully reflect Auna's strong growth fundamentals and its unique market position.
The analyst acknowledged that certain factors such as higher business complexity, leverage ratios above optimal levels at 4.4 times net debt to EBITDA for 2023, and recent regulatory concerns in Colombia could dampen investor sentiment. However, Citi anticipates that consistent execution of Auna's business plan should allow the stock's value to adjust upward over time.
InvestingPro Insights
As Citi shines a spotlight on Auna SA with a favorable Buy rating, a deeper dive into the company's financials through InvestingPro reveals a mixed picture. Auna's valuation suggests a strong free cash flow yield, which can be an attractive point for investors looking for companies that generate ample cash. However, the market seems to have responded tepidly in the short term, with the stock underperforming over the last month and currently trading near its 52-week low.
InvestingPro data shows that despite a lack of profitability over the last twelve months, Auna has witnessed a significant revenue growth of 58.1% for the same period. The company's market capitalization stands at $555.12 million, while the price to book ratio is relatively low at 1.4, potentially indicating an undervalued stock. The revenue growth coupled with a gross profit margin of 37.03% underscores the company's strong operational capabilities.
Investors considering Auna SA may find these metrics particularly relevant given the company's recent expansion and the growth drivers identified by Citi. With the stock's current performance and financial health in view, those interested in further analysis can explore additional InvestingPro Tips for a comprehensive understanding of Auna's potential. There are 5 more tips available on InvestingPro, and readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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