Get the Latest Investment Ideas Delivered Straight to Your Inbox. Subscribe


Healthcare Stock Has Reasonable Value Before Seasonal Profit, Analyst Says
Research Report

View Important Disclosures for this Article
Share on Stocktwits


K-Bro Linen Inc.'s FQ23 financial data supported its Buy rating, according to a Leede Jones Gable research note.

Leede Jones Gable analyst Dr. Douglas W. Loe maintained a Buy rating on K-Bro Linen Inc. (KBL:TSX) in a report published on March 25, 2024.

The analyst slightly revised his price target upward to CA$43.00 from CA$41.25, implying a potential total return of 29.6% (including a 3.5% dividend yield) based on the current price of CA$34.10.

Key Financial Results

According to Loe, K-Bro Linen reported strong FQ423 results by seasonal standards, with consolidated revenue/EBITDA/margin of CA$82.5M/$14.3M/17.3%, despite predictable sequential softness compared to FQ323 data of CA$86.9M/$17.7M/20.4% due to hospitality seasonality.

Dr. Loe projected F2024 revenue/EBITDA/EPS/AFFO per share of CA$330.9M/$57.7M/$1.91/$2.89, compared to F2023 data of CA$320.9M/$56.8M/$1.64/$3.02, and introduces F2025 forecasts of CA$341.5M/$61.1M/$2.34/$3.09, which assume 3.1%/3.2% sequential revenue growth and 1.7%/5.8% EBITDA growth in F2024/25, respectively.

Analyst Commentary

Dr. Loe stated, "We are maintaining our Buy rating on KBL while slightly revising our PT upward to CA$43.00 from CA$41.25 based in part on shifting forward the reference year in our EBITDA-EPS-AFFO-based valuation methodologies to F2025 (was F2024 previously) and by infusing FQ423 data just reported into our model as a new baseline from which we project growth."

The analyst noted that while K-Bro could sustain growth by acquisition into F2024/F2025, the model does not overtly incorporate assumptions on the pace or magnitude of future acquisitions. Dr. Loe expects FQ124 revenue/EBITDA/AFFO to be sequentially flat based on seasonally soft hospitality laundry processing volumes, with offsetting seasonal strength transpiring thereafter in FQ224 and increasing further into FQ324.


Dr. Loe's revised price target of CA$43.00 was based on the average of EBITDA-EPS-AFFO valuation methods using F2025 as the reference year. This price target corresponded to a one-year return on share price appreciation alone of 26.1% and a total return (including a 3.5% dividend yield) of 29.6%.

The analyst wrote that he believes that K-Bro Linen represents reasonable value at current levels before seasonal profitability strength materializes in the coming quarters.

Dr. Loe concluded, "Accordingly, we believe that KBL represents reasonable value at current levels before seasonal profitability strength materializes in a quarter or two."

Want to be the first to know about interesting Healthcare Services investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. Subscribe

Important Disclosures:

  1. This article does not constitute investment advice and is not a solicitation for any 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. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 
  2. 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.

For additional disclosures, please click here.

Disclosures for Leede Jones Gable, K-Bro Linen Inc., March 25, 2024

Leede Jones Gable Inc. (LJG) is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF). This document is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. All information is as of the date of publication and is subject to change without notice. Any opinions or recommendations expressed herein do not necessarily reflect those of LJG. LJG cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. LJG employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. LJG employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients. Disclosure codes are used in accordance with Policy 3400 of IIROC.

Description of Disclosure Codes

  1. LJG and its affiliates collectively beneficially own 1% or more of any class of equity securities of the company as of the end of the preceding month or the month prior to the preceding month if the report was issued prior to the 10th.
  2. The analyst or any associate of the analyst responsible for the report or public comment hold shares or is short any of the company's securities directly or through derivatives.
  3. LJG or a director or officer of LJG or any analyst provided services to the company for remuneration other than normal investment advisory or trade execution services within the preceding 12 months.
  4. LJG provided investment banking services for the company during the 12 months preceding the publication of the research report.
  5. LJG expects to receive or intends to seek compensation for investment banking services in the next three months.
  6. The analyst preparing the report received compensation based upon LJG investment banking revenues for this issuer within the preceding 12 months.
  7. The director, officer, employee, or research analyst is an officer, director or employee of the company, or serves in an advisory capacity to the company.
  8. LJG acts as a market maker of the company.
  9. The analyst has conducted a site visit and has viewed a major facility or operation of the issuer.
  10. The company has paid for all, or a material portion, of the travel costs associated with the site visit by the analyst.

Dissemination All final research reports are disseminated to existing and potential institutional clients of Leede Jones Gable Inc. (LJG) in electronic form to intended recipients thorough e-mail and third-party aggregators. Research reports are posted to the LJG website and are accessible to customers who are entitled the firm’s research. Reproduction of this report in whole or in part without permission is prohibited.

Research Analyst Certification The Research Analyst(s) who prepare this report certify that their respective report accurately reflects his/her personal opinion and that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views as to the securities or companies. Leede Jones Gable Inc. (LJG) compensates its research analysts from a variety of sources and research analysts may or may not receive compensation based upon LJG investment banking revenue.

Canadian Disclosures This research has been approved by Leede Jones Gable Inc. (LJG), which accepts sole responsibility for this research and its dissemination in Canada. LJG is registered and regulated by the Investment Industry Regulatory Organization of Canada (IIROC) and is a Member of the Canadian Investor Protection Fund (CIPF). Canadian clients wishing to effect transactions in any designated investment discussed should do so through a LJG Registered Representative.

U.S. Disclosures This research report was prepared by Leede Jones Gable Inc. (LJG), a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF). This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. LJG 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. Any resulting transactions should be effected through a U.S. broker-dealer.

Want to read more about Healthcare Services investment ideas?
Get Our Streetwise Reports Newsletter Free and be the first to know!

A valid email address is required to subscribe