Tuesday, JPMorgan (NYSE:JPM) initiated coverage on Auna SA (NYSE: AUNA) with an Overweight rating and a price target of $16.00. The firm sees a significant potential for the shares, suggesting a 100% upside from its current level.
Auna SA, a leading healthcare service provider in Latin America excluding Brazil, operates in Mexico, Peru, and Colombia. The company's network includes 15 hospitals and 10 outpatient clinics, with a strong focus on cancer treatment in Peru.
The company is recognized for its patient-centric model that integrates high-quality medical protocols and services, delivered by its own team of physicians. Auna's strategy is to continue consolidating its market presence, especially in Mexico, where there is a notable opportunity for the growth of private healthcare due to comparatively low penetration rates.
JPMorgan highlighted Auna's attractive valuation, trading at 6x/5x 2024/2025 estimated EV/EBITDA, which is a 10-15% discount to its peers. Despite the complexities arising from Auna's diverse geographical presence, the firm's analysis indicates that the company's stock should be trading on par with its peers, considering its promising growth prospects.
The firm's forecast for Auna includes an 11% compound annual growth rate (CAGR) in revenue over the next five years, with EBITDA expected to grow at a rate of 13%. This growth is anticipated to be driven by the company's integrated care approach and expansion in markets with high potential for private health development.
InvestingPro Insights
As JPMorgan kickstarts coverage on Auna SA with a bullish stance, real-time data from InvestingPro aligns with the bank's optimism in certain aspects, while highlighting areas of concern. Auna's market capitalization stands at $555.12 million, reflecting its mid-cap status in the healthcare sector. The company's revenue has shown a remarkable increase of 58.1% over the last twelve months as of Q1 2023, signaling strong growth potential. Furthermore, the revenue growth for Q1 2023 alone was 26.94%, underpinning the firm's expansion trajectory.
However, the InvestingPro Tips suggest a cautious tone. Auna's stock has indeed fared poorly over the last month, with a price total return of -16.67%, and it's trading near its 52-week low. The valuation implies a strong free cash flow yield, which could be a silver lining for long-term investors. But it's important to note that the company has not been profitable over the last twelve months, and it does not pay a dividend, which might deter income-focused investors.
For those looking to delve deeper into Auna's financials and future prospects, InvestingPro offers additional tips and metrics. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and uncover more insights that could inform your investment decisions. There are 5 more InvestingPro Tips available for Auna SA, providing a comprehensive analysis for savvy investors.
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