Cano Health (CANO) is a play on Baby Boomers

Hello all – a very quick DD read on Cano Health (CANO), a disruptive value-based primary care provider that should trade at least inline with peers, which would suggest a $22-$24 price.

  • CANO Health is a primary care provider for Medicare patients
  • CANO delivers value-based care to patients through a fixed or capitated payment from insurers
  • CANO assumes all risk and benefit, incentivizing it to invest in preventative care to optimize outcomes and lower costs
  • CANO is part of a growing trend towards value-based care which increases effectiveness and reduces overall healthcare costs as demonstrated by the company’s growing partnerships and financial performance
  • CANO currently serves 156k members in 15 markets with only 6% penetration in existing markets.
    • The overall TAM is enormous at 24.1M Medicare Advantage enrollees in 2020
  • The company has plenty of runway to grow organically and through acquisitions
    • Acquired University Health Care on 6/14 for $600M adding 24k Medicare Advantage members
    • Acquired Doctors Medical Center on 7/2 for $300M adding 7k Medicare Advantage members, 31k Medicaid members, and 14k ACA members
  • CANO compares very favorably to its publicly traded peers $AGL, $ONEM and $OSH
  • Not only is CANO projected to have higher revenue growth, it is also CURRENTLY EBITDA PROFITABLE
  • CANO is expected grow at a 55% CAGR from 2020-2023E, however only trades at 3.2x 2022E revenue compared to slower growing $ONEM @ 5.4x and $AGL @ 5.7x or similarly growing $OSH @ 5.4x
  • If you were to value $CANO at a similar valuation multiple, you’d get to a $22-$24 stock price
  • Underscoring how cheaply valued CANO trades, executives recently made large open market purchases of stock and warrants from August 16th – August 30th
    • CEO purchased $16.9M of stock and $812k of warrants
    • Chief Clinical officer purchased $8.5M of stock and $176k of warrants
    • General Counsel purchase $150k of stock
  • CANO has beat earnings each quarter and importantly has steadily raised 2021E and 2022E guidance as you can see below:
  • In summary, CANO is a rapidly growing and profitable company attacking massive market that needs disruption and is attractively valued at an almost 50% discount to peers, which executives have recently validated with large open market purchases

This article is written by u/apan-man.