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Healthcare Tech Firm Improves Earnings and Cash Flow in Q3/22
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These changes earned Reliq Health Technologies Inc. an upgrade in overall rating by independent investment research and advisory firm, Jefferson Research.

Reliq Health Technologies Inc. (RHT:TSX.V; RQHTF:OTCQB; A2AJTB:WKN) bolstered its cash flow and earnings during Q3/22, leading Jefferson Research to uprate the telemedicine company to Hold from Sell, as reported in a June 10 research note.  

Jefferson rates companies on five metrics—cash flow quality, earnings quality, operating efficiency, balance sheet, and valuation—to derive an overall rating.

During Q3/22, Reliq achieved a better quarter-over-quarter (QOQ) rating in two categories: earnings quality and cash flow quality.

In earnings quality, the area in which it performed the best, the company moved to Strongest from Strong.

"With a reported net income of -$800,000 in the last quarter that was equal to the adjusted number, Reliq's quality of net income earnings is extremely high," Jefferson Research noted.

In terms of cash flow quality, Reliq also shone. Having increased cash flow to -$1.5 million from -$2.8 million QOQ, the company garnered a Strong rating, improved from Weak.

Also positive for Reliq is its Low-Risk valuation rating.

"A favorable valuation (a Least Risk or Low-Risk rating) implies lower potential downward price risk that is evidenced by a company price multiple that is lower than the corresponding sector average," Jefferson Research explained.

Areas in which Reliq could improve are operating efficiency and balance sheet, Jefferson Research noted.

In the operating efficiency category, Reliq showed no change, again earning a rating of Weak. This is because the life sciences company's gross margin and asset turnover worsened during Q3/22. Gross margin dropped to 65.1% from 74%.

"The lower margin indicates that Reliq's competitive position has worsened and the company may not be able to derive higher prices for their goods or services," according to Jefferson Research.

On a positive note regarding operating efficiency, however, during the quarter, Reliq strengthened its earnings before interest and tax margin (to -29.7% from -93%), net margin, return on investment capital, sales, and general administrative costs, and equity turnover.

As for the balance sheet, Reliq fared worse QOQ, moving to a rating of Weakest from Weak because of worsening quick and current ratios. The lower current ratio, having dropped to 4.6 times from 7.3 times, indicates Reliq decreased its amount of current assets relative to current liabilities. The decreased quick ratio, down to 4.4 times from 6.7 times, shows the company lowered its total liquid assets relative to current liabilities.

"The balance sheet shows the ability of Reliq to pay its bills and fund future growth," Jefferson Research wrote.

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1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

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Disclosures for Jefferson Research, Reliq Health Technologies Inc., June 10, 2022

This report is for information purposes only for clients of Jefferson Research & Management and in no way should be interpreted as a complete investment recommendation. This report has been prepared exclusively by Jefferson Research & Management. Information contained in this report is obtained from sources believed to be reliable, but no guarantee is made to its accuracy and no representation is made that it is complete, or that errors, if discovered, will be corrected.

1) Jefferson Research & Management and its staff are not involved in investment banking activities for firms covered.

2) No employee of Jefferson Research & Management is on the board of any covered company and no outsiders are members of Jefferson Research & Management’s board.

3) Jefferson Research & Management employees trading stock in rated companies are subject to trading restrictions prior to release (once identified) and for a one day period subsequent to rating changes but do not individually or collectively own more than 1 percent of the outstanding stock of a covered company. No part of this report can be reprinted or transmitted electronically without the prior written authorization of Jefferson Research & Management.

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