Hi Bruce,
CRH is a niche player in the health industry. It provides anesthesiology services to gastroenterologists in the United States. It also has the CRH O'Regan System, a single-use, disposable, hemorrhoid treatment. COVID-19 significantly impacted operations as demand for procedures were drastically reduced by the restriction of elective health procedures and social distancing measures. In March, volumes dropped by 40%, where as April and May say drops of 10% and 25% below normal volumes. It is likely for this reason the company' stock price is still down 26% year to date.
Given what we've seen from the market thus far, procedure volumes are likely beginning to return to normal. Likewise, CRH appears to be ramping up the pace of acquisitions. Since the company last reported earnings, it has announced three new acquisitions and closed on a previously announced deal. Combined, these 4 deals will add $9.7 million in annual revenue and are all immediately accretive to cash flow and adjusted EBITDA.
It is nice to to see the company leverage its strong financial position to ramp up expansion. The GI industry is highly fragmented, and these bolt on acquisition can add up fast. Furthermore, some are likely to be in financial distress as a result of the pandemic - it appears CRH is being opportunistic. This to me is a sign of a strong management team. This is important because growth has slowed in recent years. In 2020, analysts estimate -36.4% pandemic-induced hit to annual revenue ($76.2M) before rebounding to $120M in 2021 - which is inline with 2019 levels.
From a valuation perspective, is seems reasonable valued at a forward P/E of 14.23, a P/B of 2.37 and 2.0 times sales. Overall, I think it is a decent company with some upside potential given its current share price. If it can post a better-than-expected second quarter, and if procedures can rebound quicker than analysts expect - then we may see its share price jump sooner than later. Plenty of IFs here, but long-term it is a solid company with strong expertise in a key health industry.
Mat