Constellation Healthcare Technologies’ (LON:CHT) buy and build strategy certainly appears to be working, judging by the annual results statement.
Revenues rose 40% to US$76.7mln in the 12 months ended last December, giving growth in underlying profits (EBITDA) of US$16.1mln, uo 115%.
Conversion of those profits into cash was good as money it made from operations rose 91% to US$15.5mln.
The layering on of new businesses masked a strong underlying growth rate of 8.8%.
Constellation describes itself as an RCM, or a revenue cycle management company. Essentially, what it does for more than 9,000 doctors on its books is bill and collect monies owed by government, insurers and patients.
It also provides practice management and purchasing services.
Obamacare, or the Affordable Care Act to give it its proper name, has created huge upheaval for physicians, complicating the rules on payment while forcing down remuneration.
For the barely profitable small firms carrying out mission-critical billing operations, Obamacare adds a financially onerous level of bureaucracy that is often the final straw.
For Constellation, it has whipped up the perfect storm – or at the very least a great backdrop - against which to consolidate a highly fragmented market.
In December the company unveiled its fourth deal of a fairly short life as a stock market-quoted company when it paid US$30mln for MDRX Medical Billing.
Talking about full-year results, chief executive Paul Parmar said: "Constellation enjoyed a successful year across all metrics.
“We increased our revenue base and more importantly, significantly increased our profitability for the year.
“Our acquisition and integration strategy is proven and we are quickly becoming one of the largest healthcare and technology services businesses in the US.”
finnCap’s punchy price target
The broker reckons the stock is worth 310p more than double the closing share price.
It points out the business is trading on a forward multiple of less than 10 times earnings 8%-plus free cash flow.