CareRx Could Become a Compelling Takeover Target: Analyst

Stifel initiated coverage of CareRx Corporation (TSX:CRRX) recently with a “Buy” rating and $8 per share target price

Capital Ideas Media | September 23, 2020 | SmallCapPower: Canada’s aging Baby Boomer population will require greater spending on healthcare and medication. This is why shares of CareRx Corporation (TSX:CRRX), formerly Centric Health Corporation, could be just what the doctor ordered for some growth-oriented investors.

(Originally published on Capital Ideas Media on August 3, 2020)

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CareRx is a provider of specialty pharmacy services to seniors in Canada, serving more than 50,000 residents in over 850 seniors and other communities, such as long-term care homes, retirement homes, assisted living facilities, and group homes.

Shareholders of the former Centric Health Corporation suffered for years from the stock’s performance, but the Company’s prospects should be aided greatly by a re-brand and a 1-for-20 share consolidation.

CareRx also recently acquired Remedy Holdings Inc., which generated approximately $60 million in revenue during 2019.

In the first quarter of 2020, CareRx reported revenue that rose 3.0% year over year to $30.4 million, with a 10% increase in Adjusted EBITDA to $2.0 million. The Company added that given its role as an essential service, the COVID-19 pandemic has had no material impact on its financial performance.

Stifel analyst Justin Keywood recently initiated coverage of CareRX stock with a “Buy” rating and $8 per share target price, representing potential upside of more than 72% from the current market price.

“We see an opportunity for CareRx to almost double its market share organically, with 45k beds up for RFP in the next 12-18 months, underpinned by the secular trend of an aging population. Our discussions with customers revealed CareRx’s competitive advantages, including exceptional service that positions the company to win more share. We also believe that CareRx will continue to be acquisitive, which combined with organic wins, could take market share close to 40%, with margin expansion resulting from larger scale. These characteristics could make the company a compelling takeout target down the road, in our view,” he wrote.

“Overall, there is a lot to like about this undervalued Canadian pharmacy play, trading at 8 times EBITDA vs. peers at 12 times and with strong management to execute.”

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