On Thursday, RBC Capital raised its rating on GoodRx Holdings Inc. (NASDAQ:GDRX) stock from Sector Perform to Outperform, increasing the price target to $10 from $8. The upgrade is attributed to the company's recent initiatives and the potential for significant growth.
The analyst from RBC Capital highlighted GoodRx's recent initiatives, including the ISP and DC programs, as well as the expansion of its MfgSolns business.
These steps are expected to provide the company with new growth opportunities and reinforce the strength of its core prescription transaction business.
According to the analyst's statement, GoodRx has established agreements with five pharmacy benefit managers (PBMs) and seven top-10 pharmacies.
The successful completion of these deals is seen as a positive sign for the company's future, as it provides a clear path to a mid-teens or higher EBITDA compound annual growth rate (CAGR) over the next three years.
The report further suggests that GoodRx's execution of these initiatives may lead to a reevaluation of its valuation. The current valuation stands at 10 times the projected 2025 EBITDA, which could be adjusted to align more closely with its growth rate and the 14 times average of its peers.
RBC Capital's new price target of $10 reflects a positive outlook on GoodRx's ability to leverage its recent initiatives for sustainable growth and improved financial performance in the coming years.
InvestingPro Insights
Following RBC Capital's optimistic outlook on GoodRx Holdings Inc. (NASDAQ:GDRX), key metrics from InvestingPro provide additional context to the company's financial landscape. GoodRx's market capitalization stands at approximately $2.7 billion, signaling a significant presence in the market. Despite a challenging period with a P/E ratio indicating a loss (given as -446.88), the adjusted P/E ratio for the last twelve months as of Q1 2024 reflects a more favorable figure of 36.27. This suggests expectations of profitability, aligning with the analyst's growth projections.
Moreover, the company's gross profit margin impressively holds at 92.38% for the same period, underscoring GoodRx's ability to maintain high margins on its revenue, which was reported at $764.16 million. With an EBITDA growth of 23.5% in the last twelve months, GoodRx demonstrates robust operational efficiency. These financials may support RBC Capital's view of the company's potential for significant growth.
InvestingPro Tips reveal that GoodRx's management has been actively buying back shares, an indicator of confidence in the company's value. Additionally, the company is expected to become profitable this year, which could be a catalyst for future growth. For investors seeking a deeper dive into GoodRx's performance and strategic moves, InvestingPro offers additional insights, including 12 more tips available at https://www.investing.com/pro/GDRX. Use the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further value in your investment research.
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