Canaccord Genuity is upping its price target on CareRx Corporation (TSE:CRRX) to C$7 from C$6.50 after the healthcare firm reported a 44% revenue growth in its fourth quarter results.
The Toronto-based company delivered revenue of C$46.4 million and an adjusted EBITDA of $4.1 million, in line with expectations for the three-month period to end December 2020.
Much of the growth was attributed to the May 2020 acquisition of RemedyRx, a specialty pharmacy firm that delivered $15.1 in revenue during the quarter.
READ: Centric Health to acquire pharmacy company Remedy Holdings in $44 million deal
Formerly known as Centric Health, CareRx is Canada's leading provider of pharmacy services to seniors communities, serving around 50,000 residents in over 900 seniors and other group-based communities.
Canaccord analysts Tania Gonsalves and Scott McFarland noted that average beds serviced by CareRx increased from 31,457 to 48,768 year-over-year, missing their 50,288 estimate, but revenue per bed fell from $4,095 to $3,805 year, beating their $3,704 estimate.
The analysts also pointed out that CareRx completed the integration of RemedyRx ahead of schedule, closing five additional fulfillment centres in 4Q to bring the company's total centre count down from 23 to 18 quarter over quarter. The consolidation of operations into fewer fulfillment centres is expected to yield $3 million in annualized cost-saving synergies going forward, Gonsalves and McFarland said.
CareRx ended the quarter with C$20 million in cash following last month’s equity offering that raised around $19.6 in net proceeds.
The Canaccord analysts maintained a ‘Buy’ rating on the stock.
“Considering the historically high number of contracts coming up for tender this year and the Ontario Ministry of Health's recent decision to pause scheduled fee changes for one year, we continue to view CRRX's growth prospects this year favorably,” they added. “With 36% projected upside to yesterday's close, we maintain our BUY rating.”
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