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Top Pick Healthcare Technology Co. Trading at Deep Discount
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The healthcare tech firm's shares are underperforming despite two consecutive record quarters and a "landmark" contract win, noted an Echelon Capital Markets report.

Think Research Corp. (THNK:TSX.V) earned a spot in Echelon Capital Markets' Top Picks portfolio for Q3/23 and is trading at a significant discount, reported Echelon Capital Markets analyst Rob Goff in a July 6 research note. Think develops and provides clinical healthcare software and services.

"The company's success stands at odds with its steep valuation discount to peers," Goff wrote. "We see Think as fundamentally attractive and catalyst rich."

Discount to peers

Think is trading at 0.7 times enterprise value (EV):2023 revenues and 8.6 times EV:EBITDA. In comparison, the same metrics for WELL Health are 2.2 times and 13.3 times, Goff reported. Another peer, Dialogue Health, EBITDA negative, is trading at 1.5 times EV:2023 revenues.

While Think's shares have underperformed year to date, WELL Health gained 67% and Dialogue Health, 37%.

Think's current share price is about CA$0.34 per share, down from its 2023 peak of CA$0.65 per share in March. This supports a buying opportunity, noted Goff. Accordingly, Echelon rates Think Speculative Buy.

Implied 224% return

Further, Goff noted, the potential return to Echelon's target price on Think, CA$1.10 per share, from the current share price is 224%.

Operational momentum

Goff summarized Think's recent successes. Last year, the healthcare tech company achieved cost synergies to the tune of about US$11.3 million (US$11.3M) and with record Q4/22 financial results, turned EBITDA positive.

This year, the company landed significant software-as-a-service (Saas) contracts that boosted its annual recurring revenues by US$10M-plus, wrote Goff. Of these, the standout is a five-year $40M Digital Front Door deal transacted with a regional health system in March. Digital Front Door is Think's digital patient engagement platform.

Think's financial results in Q1/23 exceeded the previous quarter's, with revenue of US$21.6M and EBITDA of US$1.1M.

Expectations for FY23

In the near term, Echelon expects Think will "continue to drive strong operating results, inching toward free cash flow positive," Goff wrote. As such, the equity research firm forecasts increases in revenue and EBITDA throughout the rest of 2023. For the full year, Echelon estimates US$93.4M of revenue, gross profit of US$49.2M and EBITDA of US$7.3M.

Echelon's bullish outlook is supported by two factors, Goff wrote. For one, Think has a strong foundation, nearly 90%, of business that is recurring or highly reoccurring. Also, the company's sales pipeline is the largest it has ever been. Echelon is optimistic Think will gain further "marquee" contracts this year.

"We see the potential for near-term deals to reflect total contract values well into the double digits ($M) and pipeline opportunities spanning both public/government health systems and private enterprises," wrote Goff.

Attractive for acquisition

Given its valuation discount and current and expected growth, Think is a potential takeout target, Goff purported.

"We believe Think's growing SaaS franchise and unique capabilities within its flagship Digital Front Door and Learning Management System offerings could provide tremendous strategic value to a larger company, such as WELL Health, in due time," he wrote.

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Important Disclosures:

  1. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. 
  2. The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
  3. This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.

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Echelon Capital Markets Disclosures for Think Research Corp., July 6, 2023

U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts.

For U.S. persons only: This research report is a product of Echelon Wealth Partners Inc, under Marco Polo Securities 15a-6 chaperone service, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

Company: Think Research Corp. | THNK:TSXV
I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.

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