On Monday, Jeffries began covering shares of The Oncology Institute Inc. (NASDAQ: TOI) with a Buy rating and a new target price of $2.50. The analysis highlights that TOI’s efficient capital-light business model is a key driver of the company’s potential to rapidly expand into both existing and new markets without significant capital investment.
The Cancer Institute’s strategy includes the creation of new clinics and partnerships, which is expected to contribute to a long-term growth forecast in excess of 20%. The company’s focus on prescription drug and clinical trial profitability is expected to help TOI achieve EBITDA and free cash flow breakeven.
According to Jeffries, TOI’s business model differentiates it from other value-based care (VBC) organizations by reducing its exposure to medical loss ratio (MLR) risk, which is often associated with the variable costs of cancer care. The episodic nature of such treatment is seen as an advantage of TOI.
The firm predicts that once the Cancer Institute’s de novo expansion reaches a steady state, the company will likely reach profitability faster than expected. This progress is expected to have a positive impact on TOI’s earnings, signaling a potentially lucrative future for the company in the sector.
InvestingAbout Insights
Since the Cancer Institute Inc. (NASDAQ: TOI) received a positive outlook from Jeffries, InvestingPro data and advice provide additional context for investors considering this healthcare player. The company’s market capitalization is a modest $135.7 million, reflecting its status as a smaller-cap stock with room for growth. Despite the challenges, TOI’s revenue has shown strong growth, with growth of 32.79% in the trailing twelve months to Q3 2023, indicating strong expansion of its business operations.
However, InvestingPro advice suggests caution. TOI is currently trading at a low earnings valuation multiple, which could be seen as an opportunity for value investors or as a reflection of market skepticism about the company’s future profitability. Analysts do not expect TOI to be profitable this year, and net income is expected to decline, which translates to the company’s current negative P/E ratio of -2.18. On the plus side, TOI has liquid assets in excess of its short-term liabilities, which could provide some financial flexibility in the near term. Moreover, the company has experienced significant price gains over the past six months, with a total return of 134.25%, highlighting the volatile but potentially lucrative nature of the market.
To gain further insight into TOI’s financial condition and future prospects, investors may wish to review additional InvestingPro adviсe. There are 7 more tips available, which can be accessed through the dedicated InvestingPro platform. For those interested, use the coupon code. PRONEWS24 to receive an additional 10% discount on annual or biennial Pro and Pro+ subscriptions.
Given analysts’ fair value target of $2.50 and InvestingPro With a fair value of $2.02, investors have a benchmark for TOI’s current share price. At its previous close, TOI’s share price was $1.88, 69.3% from its 52-week high, suggesting room for potential growth if the company can capitalize on its strategic initiatives and overcome profitability challenges.
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