With a $1.75 billion market capitalization, Cano Health, Inc. (CANO) is a small-cap company operating as a value-based primary care provider for seniors and underserved communities. The company went public on June 4, 2021, merging with Jaws Acquisition Corp., a special purpose acquisition company (SPAC).The stock has declined 31.5% in price since, to close yesterday’s trading session at $10.10, due primarily to investors’ pessimism surrounding SPACs. 

However, according to World Population Prospects 2020, the global population aged 65 years and above was 703 million in 2020. In addition, the number of older people, who are CANO’s target market, is projected to double by 2050 to 1.5 billion.

CANO has increased its full-year 2021 and 2022 guidance. The company expects its membership to be roughly 215,000 this year and in the range of 275,000 - 280,000 next year. Also, its revenue is expected to be approximately $1.60 billion in its fiscal year 2021 and in the range of $2.50 - $2.60 billion in fiscal 2022. In addition, Credit Suisse Group AG (CS) recently initiated coverage on CANO with an outperform rating. So, the stock’s near-term prospects look promising.

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Here are the factors that we think could influence CANO’s performance in the coming months:

Strategic Acquisitions

CANO acquired Doctor's Medical Center (DMC) on July 2. It is a primary care provider that offers an innovative and integrated approach to Medicare and Medicaid. The move  is expected to expand CANO’s  membership and enhance its leading position in the fragmented Florida market. CANO also acquired University Health Care and its affiliates in June 2021.

Robust Financials

For the second quarter, ended June 30, 2021, CANO’s top line grew 129.6% year-over-year to $393.16 million, driven primarily by acquisitions and membership growth. In addition, the company’s Medicare capitated members for the quarter increased 54.1% year-over-year to 111,866, while its Medicaid capitated members increased 51.8% year-over-year to 25,178.

CANO’s net income came in at $4.95 million in the second quarter, versus a $10.99 million loss in the year-ago period. Also, its adjusted EBITDA for the quarter was  $24.78 million, representing a 52.6% year-over-year rise.

Favorable Analyst Estimates

Analysts expect CANO’s revenue to increase 45.8% year-over-year to $2.19 billion in its fiscal year 2022. The company’s EPS is expected to grow 200% year-over-year to $0.03 next year. Furthermore,  the stock is expected to hit $18 in the near term, which indicates a potential 78.2% upside. The only analyst providing a rating for the stock has rated it a Buy.

Bottom Line

CANO has 108 medical centers in the United States across Florida, Texas, Nevada, and Puerto Rico. The company went public recently and its financials are strong. Furthermore, analysts expect its revenue and EPS to increase significantly in the long run. So, it could be wise to buy the stock now.

Click here to checkout our Healthcare Sector Report for 2021

CANO shares were trading at $10.38 per share on Friday morning, up $0.28 (+2.77%). Year-to-date, CANO has declined -22.60%, versus a 19.03% rise in the benchmark S&P 500 index during the same period.

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.

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