In a February 11, 2025 research note, Leede Financial analyst Douglas W. Loe maintained a Buy rating on Quipt Home Medical Corp. (QIPT:NASDAQ; QIPT:TSX.V) while lowering his target price to US$8.25 from US$12.00, citing multiple compression despite strong operating fundamentals in the respiratory medical equipment distribution business.
The company reported FQ1 2025 revenue of US$61.4 million, EBITDA of US$14.1 million, and margin of 22.9%, in line with trailing eight-quarter averages of US$61.0 million, US$13.9 million, and 22.8%, respectively. Operating cash flow was US$10.2 million (US$0.22/share), below the trailing eight-quarter average of US$11.0 million (US$0.25/share).
The company exited the quarter with US$15.5 million in cash and US$69.3 million in total debt. Financial ratios remained healthy with an EBITDA-to-interest coverage ratio of 8.7x and debt-to-EBITDA run-rate ratio of 1.2x. Operational metrics showed slight improvement with 221,000 unique respiratory equipment set-ups/deliveries compared to 215,000 in FQ1 2024.
Key risks include an ongoing U.S. Department of Justice investigation into billing practices in Georgia, though the SEC concluded its investigation in November 2024 without recommending enforcement action. The compressed share value also limits acquisition opportunities, particularly at multiples comparable to the recent Great Elm transaction at 6.2x T12M EBITDA.
The analyst suggests potential catalysts, including the establishment of a dividend policy distributing quarterly free cash flow or a potential go-private transaction. The US$8.25 target price is based on a 6x EV-to-F2026 EBITDA forecast of US$56.1 million.
The share price at the time of the report of US$2.97 represents a potential return of 178% to Leede's US$8.25 target price.
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Disclosures for Leede Financial Inc., Quipt Home Medical Corp., February 11, 2025
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