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Buyback activity remained muted for the second consecutive week of January with only eight companies announcing buybacks last week.
The company that topped our list is a healthcare technology company, Veradigm Inc. (MDRX). The company, formerly known as Allscripts, delivers information technology solutions and services to healthcare organizations across the globe. Its clients include healthcare providers, patients, hospitals, physician clinics, retail pharmacies, pharmacy benefit managers, insurance companies, health plan providers and life sciences industries.
Allscripts provides a group of software services across a number of sectors. The company provides Electronic Health Records (EHR) services through its various solutions. In October 2021, the company partnered with NextGen Healthcare, Inc. (NXGN) to enable Veradigm AccelRx (a medication fulfillment platform designed to help cut time-to-fill for specialty drugs) integration within NextGen Enterprise EHR by mid-2022.
Its Veradigm platform provides actionable data insights and workflow solutions for life sciences industries. It connects over 300,000 US healthcare providers via the Veradigm Network. Its FollowMyHealth service is a patient engagement platform.
With the acquisition of Athenahealth by Veritas Capital in 2019 and the acquisition of Cerner by Oracle last year, there are very few publicly traded EHR software companies.
Financials and Valuations:
Like most EHR software companies, Veradigm is not very profitable. Net income margin of under 4% and return on equity of under 9% are not exciting. Gross margin on the other hand is the highest in a decade. The company beats earnings estimates in seven out of the last eight quarters and received three positive EPS revisions from analysts over the last three months. Bucking the trend of most software companies, the stock is up nearly 9% over the last year.
Revenue appears to have stabilized around $1.53 billion in 2022, after a steep fall in 2021. The company has a long way to go to get back to its pre-pandemic revenue of $1.76 billion.
Veradigm, with a trailing EV/EBITDA of 16 and forward EV/EBITDA of 11 looks relatively cheap when compared to peers like NextGen Healthcare, Inc. (NXGN). Despite being a software company, it trades at an EV/Sales of 3 on account of its low margins and single digit revenue growth rate expected in 2023.
Q3 2022 results:
Both gross profit and adjusted EBITDA margins expanded meaningfully on a year-over-year basis as well as sequentially from the second quarter. The company had another solid quarter of free cash flow as it generated $42 million of cash flow from continuing operations and $34 million of free cash flow during the quarter bringing year-to-date free cash flow to $90 million. The company sports $274 million of net cash as of quarter end. The Veradigm business segment saw year-over-year revenue growth of 6% during the quarter. Non-GAAP EPS was $0.23 per share, which was up 10% year-over-year.
Share Buybacks:
Veradigm has been consistently buying back its stock. In the fourth quarter of 2022, Veradigm repurchased $57 million of its common stock, bringing its full-year total to $234 million. It has retired around one-fifth of its shares since 2019.
The Bottom Line:
Healthcare technology is a challenging subsector of software and while Veradigm is currently performing well, there is a lot of room for improvement. Given its low margins, cash rich balance sheet and the fact that several EHR companies have been acquired in recent years, it is possible that Veradigm might become a target for a private equity firm or a strategic acquirer. I like the shareholder friendly management but would like to see a combination of operational efficiencies and top line growth before I get interested in the stock.
Welcome to edition 42 of Buyback Wednesdays, a weekly series that tracks the top stock buyback announcements during the prior week. The companies in the list below are the ones that announced the most significant buybacks as a percentage of their market caps. They are not the largest buybacks in absolute dollar terms. A word of caution. Some of these companies could be low-volume small-cap or micro-cap stocks with a market cap below $2 billion.
Top 5 Stock Buyback Announcements
1. Veradigm Inc. (MDRX): $19.06
On January 11, 2022, the Board of Directors of this healthcare technology company approved a new share repurchase program authorizing the company to repurchase up to $250 million of its class A common stock equal to nearly 12.5% of its market cap at announcement.
| Market Cap: $2.08B | Avg. Daily Volume (30 days): 1,113,403 | Revenue (TTM): $1.53B |
| Net Income Margin (TTM): 3.97% | ROE (TTM): 8.93% | Net Cash: $273.8M |
| P/E: 22.35 | Forward P/E: 20.24 | EV/EBITDA (TTM): 15.68 |
2. The Wendy’s Company (WEN): $22.82
On January 13, 2022, the Board of Directors of this quick-service restaurant company approved a new share repurchase program authorizing the company to repurchase up to $500 million of its class A common stock, equal to around 10.2% of its market cap at announcement.
| Market Cap: $4.86B | Avg. Daily Volume (30 days): 2,062,561 | Revenue (TTM): $1.63B |
| Net Income Margin (TTM): 11.54% | ROE (TTM): 38.41% | Net Debt: $3.56B |
| P/E: N/A | Forward P/E: N/A | EV/EBITDA (TTM): 18.38 |
3. Victoria’s Secret & Co. (VSCO): $38.46
On January 11, 2022, the Board of Directors of this women’s apparel and accessories retailer approved a new share repurchase program authorizing the company to repurchase up to $250 million of its class A common stock equal to nearly 8.3% of its market cap at announcement.
| Market Cap: $3.11B | Avg. Daily Volume (30 days): 1,584,245 | Revenue (TTM): $6.50B |
| Net Income Margin (TTM): 6.48% | ROE (TTM): 163.49% | Net Debt: $2.63B |
| P/E: 7.99 | Forward P/E: 12.14 | EV/EBITDA (TTM): 6.42 |
4. AnaptysBio, Inc. (ANAB): $25.48
On January 13, 2022, the Board of Directors of this biotechnology company approved a new share repurchase program authorizing the company to repurchase up to $50 million of its class A common stock, representing around 6.7% of its market cap at announcement.
| Market Cap: $724.44M | Avg. Daily Volume (30 days): 317,847 | Revenue (TTM): $4.49M |
| Net Income Margin (TTM): N/A | ROE (TTM): -40.79% | Net Cash: $423.13M |
| P/E: N/A | Forward P/E: N/A | EV/EBITDA (TTM): -2.59 |
5. Forza X1, Inc.(FRZA): $1.67
On January 17, 2022, the Board of Directors of this electric boats manufacturer, approved a new share repurchase program authorizing the company to repurchase up to $1 million of its class A common stock equal to nearly 5.7% of its market cap at announcement.
| Market Cap: $17.45M | Avg. Daily Volume (30 days): 106,687 | Revenue (TTM): N/A |
| Net Income Margin (TTM): N/A | ROE (TTM): N/A | Net Cash: 13.80M |
| P/E: N/A | Forward P/E: N/A | EV/EBITDA(TTM): -1.52 |
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