On August 12, 2025, Leede Financial Inc. analyst Dr. Douglas W. Loe maintained a Buy rating on Quipt Home Medical Corp. (QIPT:NASDAQ; QIPT:TSX.V) with an unchanged target price of US$4.50, representing 111% upside from the current share price at the time of the report of US$2.13.
The analyst cited sequentially stable third-quarter fiscal 2025 EBITDA results and the strategic value of a new joint venture with Hart Medical Equipment that will expand the company's U.S. footprint in respiratory care.
Third Quarter Fiscal 2025 Financial Performance
Quipt Home Medical Corp. reported third-quarter fiscal 2025 financial results for the June-end quarter that were sequentially stable despite continued pressure from the discontinuation of Medicare 75/25 funding affecting the broader durable medical equipment distribution industry. Third quarter consolidated revenue, EBITDA, and margin were US$58.3 million, US$13.7 million, and 23.5% respectively, compared to second quarter results of US$57.4 million, US$13.3 million, and 23.3%.
The company served 151,000 patients during the quarter, down from 153,000 in the third quarter of fiscal 2024, while executing 210,000 unique equipment setups and deliveries compared to 216,000 in the prior year period. Operating cash flow remained flat sequentially at US$9.3 million or US$0.20 per share, though below the US$11.2 million generated in the third quarter of fiscal 2024.
Hart Medical Equipment Joint Venture
Quipt announced a strategic joint venture with Michigan-based Hart Medical Equipment, acquiring a 60% ownership stake valued between US$17 million to US$18 million. Hart Medical generates approximately US$60 million in trailing 12-month revenue with US$7 million in EBITDA, representing a 12% EBITDA margin significantly below Quipt's corporate average of approximately 23%.
Loe noted that "if we assume that Hart's equipment distribution operations can indeed achieve Quipt-average EBITDA margin of 23% or so (. . .) then on a go-forward margin-adjusted basis, the transaction could notionally be prospectively valued at 2.1x annualized target EBITDA, obviously a much more attractive multiple." The analyst expects Hart's EBITDA margin to expand linearly from its current 12% level to 23% by the second quarter of fiscal 2026.
Financial Position and Debt Metrics
Quipt exited the quarter with US$11.3 million in cash and US$65.0 million in total debt, with both figures expected to be modified on a pro forma basis to fund the Hart joint venture. For modeling purposes, Loe assumes the transaction will be fully funded with new debt, bringing pro forma debt to US$82.5 million.
The company's financial ratios remain attractive by industry standards, with third quarter EBITDA-to-interest coverage ratio of 9.2x and long-term debt-to-EBITDA run-rate ratio of 1.2x, both well below high financial risk thresholds of 3x as defined by the analyst.
Operational Metrics and Cash Flow Generation
Free cash flow by Loe's calculation was positive at US$5.3 million or US$0.113 per share, representing a 9.2% free cash flow margin. This was down sequentially from second quarter free cash flow of US$7.3 million due to higher investment in rental respiratory equipment of US$4.3 million compared to US$1.2 million in the prior quarter.
The company's business model requires continuous capital deployment for purchasing ventilators and CPAP devices that are rented to respiratory home healthcare clients, which contributes to the gap between EBITDA and free cash flow generation.
Strategic Acquisition History and Valuation Multiple
Quipt has completed 18 acquisitions since becoming public, with an average revenue multiple of 0.7x and EBITDA multiple of 3.7x on a consolidated basis. The Hart joint venture acquisition multiple of 4.2x trailing EBITDA, while appearing aggressive compared to Quipt's current 2.8x fiscal 2026 consensus EBITDA multiple, reflects the potential for significant margin expansion under Quipt's operational improvements.
Loe emphasized that "Quipt has a long track record of expeditiously equilibrating EBITDA margin post-acquisition at its corporate average within a quarter of acquisition," supporting the timeline expectations for Hart's margin improvement.
Updated Financial Forecasts and Valuation
Incorporating the Hart joint venture economics, Loe projects fiscal 2026 revenue and EBITDA of US$308.8 million and US$64.8 million respectively, with EBITDA margin of 21.0%. Fiscal 2027 projections call for revenue and EBITDA of US$315.0 million and US$71.0 million, with EBITDA margin recovering to 22.5%.
The analyst's US$4.50 target price is based on a 4.5x enterprise value-to-EBITDA multiple applied to fiscal 2026 estimates, reduced from 5.0x to reflect anticipated modest EBITDA margin compression during the first half of that fiscal period as Hart's operations are integrated and optimized.
Industry Challenges and Competitive Position
The durable medical equipment industry continues to face headwinds from the discontinuation of Medicare 75/25 funding, which provided supplemental funding under the CARES Act through 2024. Quipt operates in 26 U.S. states serving over 270,000 unique patients, with plans for continued acquisitive growth to expand geographic reach and service capabilities.
Despite ongoing industry challenges, Quipt's operational track record and margin expansion capabilities position the company to continue generating stable cash flows while pursuing strategic growth opportunities through selective acquisitions and joint ventures.
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Disclosures for Leede Financial Inc., Quipt Home Medical, August 12, 2025
Disclosures None
Important Information and Legal Disclaimers Leede Financial Inc. (Leede) is a member of the Canadian Investment Regulatory Organization (CIRO) and a member of 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 Leede. Leede 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. Leede 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 3600 of CIRO. Description of Disclosure Codes 1. Leede 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. Leede or a director or officer of Leede 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. Leede provided investment banking services for the company during the 12 months preceding the publication of the research report. 5. Leede 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 Leede 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. Leede acts as a market maker of the company. 9. 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This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Leede is not registered as a broker-dealer in the United States and is not 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.
