Why healthcare software play Craneware could be on a £30 share price heading


– $400 million Sentry acquisition doubled software company’s revenue

– Craneware tools are deeply embedded in the operations of US hospitals

– Cloud upsell opportunity as offered Trisus platform modules

When analysts are right crane gear (CRW:TARGET) is on the cusp of a fresh spurt of organic growth that could take the share price back to pre-pandemic £30 levels.

Headquartered in Edinburgh, Craneware provides software solutions that help hospitals and other healthcare providers discover, transform and optimize assets to improve clinical outcomes and financial performance.

Craneware’s resilient operating margins (31.3% over the last year ended June 30, 2022) are a testament to its proprietary customer base, which is unlikely to churn even if there is a competing product at a lower price point. “Because the software is critical for hospitals operating on low margins to get their reimbursements and grants on time,” the Berenberg analysts said.

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Revenue grew 119% to $166 million, while ARR (annual recurring revenue) surged 164% to $170 million in a year heavily influenced by its transformative $400 million acquisition of Sentry Data Systems US Dollar in July 2021. This deal brought Craneware into pharmacy procurement software, essentially doubling Craneware’s revenue base.

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Craneware shares rose nearly 7% to £19.50, their highest since early 2022.

CLOUD PLATFORM OPPORTUNITY

Aside from Sentry, Craneware has brought its customers onto its cloud software platform, and it’s an area where analysts see a big opportunity for organic growth. During a recent on-site visit, Berenberg analysts left no doubt that Craneware’s big data collection and processing is deeply embedded in hospital and pharmacy workflows, making it difficult to replace.

“We agree with the group’s view that upselling additional Trisus modules will be easier if they can first move all customers to the cloud, including the Chargemaster product,” says Berenberg.

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Chargermaster is a yield optimization and risk control module of the company’s broader Trisus toolkit.

“Currently, 80% of ARR is in the cloud, and that gives us confidence that upselling additional modules is just around the corner,” said Berenberg.

The investment bank estimates Craneware’s EBITDA (earnings before interest, taxes, depreciation and amortization) at $57 million on sales of $188 million this year through June 2023, which implies a 30% margin.


Issue Date: September 20, 2022



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