While medical devices as an industry witnessed a drop in demand during the pandemic, there has been one part of its umbrella that gained strong momentum across the globe – home medical devices. With hospitals filled with Covid-19 patients, a large number of non-Covid patients were forced to stay at home and arrange for the relevant medical equipment which led to a huge demand for at-home device offerings. As a matter of fact, there was also a particularly high demand for various equipment like oxygen concentrators at home for Covid patients who were not hospitalized over the past year. Our small cap pick for the day is one of the most heavily undervalued companies within the home medical devices space that operates on a subscription model and has terrific growth potential – Quipt Home Medical Corp (NASDAQ:QIPT).
Company Overview
Quipt Home Medical is a premium medical equipment supplier company that provides in-home monitoring equipment, daily and ambulatory aides, oxygen therapy, sleep apnea treatment, home ventilation, and respiratory equipment rentals across the United States. Headquartered in Wilder, Kentucky, the company delivers nearly 250000 pieces of equipment every year to a network of more than 17000 referring physicians. It operates on a subscription-based revenue model that provides initial equipment supply and implementation to thousands of patients every year. In addition, they also deal with periodical resupply of orders for patients throughout the year. Significant technological investment in the Quipt platform has let the company offer exceptional services to its patients. This unique technology also serves as a major differentiating factor between Quipt and its competitors. Quipt’s innovative platform has also simplified the DME delivery process which in turn helped Quipt in winning market share over the last few years.
DME Ordering and Delivery Process
Quipt’s innovative platform leverages technology as well as strong regional distribution to simplify all the phases of the Durable Medical Equipment (DME) delivery process. This has allowed Quipt to operate a successful business model that is truly patient centric. This approach helped physicians to improve the clinic efficiency without neglecting the patient’s health. The DME delivery process is very reliable, easy, and quick. It starts with Quipt’s field sales team and ends with successful collection by the revenue cycle team of Quipt. Continue reading to know the process. Quipt’s sales representatives call on the physicians, hospitals, rehab centres, and long-term care to give them an overview about their equipment. When the physician and/or clinical staff order the device, they get a confirmation from the company’s end. Then they submit all the necessary details to Quipt’s customer service centre. The customer service team obtains authorization as well as verifies the patient benefits. After that, the certified respiratory therapists and technicians of Quipt ensure a successful delivery of the prescribed equipment to the patient. They also provide proper in-house training to educate the patient about the equipment. After that the revenue team processes all the required documentation and paperwork for billing and also manages the final collection. Quipt’s ordering platform integrates all aspects of the ordering procedure to ensure an exceptional patient satisfaction.
Organic Growth Metrics
With an estimated 10000 people turning 65 every day in the next 15 years, the current size of the DME industry represents only a small part of what it will become in the next few years. Why? Because the oxygen utilization among patients 65 and over will continue to increase, especially among COPD (Chronic Obstructive Pulmonary Disease) patients which as a demographic has shown an increase of 15 percent in the last five years. According to the ASAS (American Sleep Apnea Association), sleep disorders such as sleep apnea will become a significant health issue in the United States as the number of sleep apnea patient has increased by nearly 70% over the past few years. Studies have also revealed that 22 million Americans suffer from sleep apnea, with 80% diagnosed with moderate and severe obstructive sleep apnea. As per some other studies, from 2015-2030, it is estimated that the number of chronic diseases apart from sleep apnea will increase by 171% to over 83 million American. This indicates a huge potential market for Quipt and its offerings.
Quipt’s Strong Market Positioning
Quipt has focused on expanding its product offering through an optimum care to establish broad-based touch points within the referring healthcare institutions and physicians. With a proven track record of performing strategic, cumulative acquisitions, the management believes that it is exclusively positioned to capture on two exceptional dynamics – its cutting-edge technology and its telehealth training program. Quipt’s strength lies in its commitment to technology. Over the last several years, the company has spent significant investments streamlining its existing systems to create a sophisticated and interconnected infrastructure. With respect to its telehealth training program, it represents the initial patient set up and an ongoing training through a drop shipment platform or telemedicine platform. It serves to increase the patient compliance and also accelerate patient onboarding. In addition, it helps to significantly reduce improper equipment use and the onboarding costs. The combination of these 2 dynamics is bound to propel the demand for Quipt’s offerings and also catalyse its stock price growth in the coming months.
Final Thoughts
As we can see in the above chart, Quipt’s stock has followed an upward trajectory but it continues to be heavily undervalued in comparison to the industry averages. The company is currently trading at an Enterprise Value/ Sales multiple of 2.03 whereas the median multiple for the medical device industry as per Gurufocus data is as high as 6.37. Similarly, the company is trading at a Price/ Free Cash Flow multiple of 9.48 which is significantly below the industry median of 32.47 implying that the price has a long way up, through multiples expansion. It is worth highlighting that Quipt’s management team has over 50 years of combined experience in healthcare administration and acquisitions with more than $500 million in transactions. Their profound understanding and use of significant workflow procedures is bound to drive strong operational efficiencies. This should be one of the most important contributors to accelerated growth for the future, especially as it relates to the successful integration of recently acquired companies. Overall, Quipt appears to be one of the hottest and most undervalued med-tech plays and should be grabbed at current levels.
Disclaimer
No Positions.