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Why Cano Health Is Up More Than 9% Today

By James Brumley – Aug 2, 2021 at 4:28PM

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The primary care company's growth has the attention of a key Wall Street name.

What happened

Shares of primary care and health clinic company Cano Health (NYSE:CANO) are up 9.7% late on Monday following the initiation of analyst coverage by Credit Suisse. The investment bank rates Cano Health an outperform, with a price target of $18 per share.

So what

It's not exactly a household name. Cano Health sports a modest market cap of $2 billion, and its clinic network only drives on the order of $600 million worth of annual revenue. Earnings before interest, taxes, depreciation, and amortization, or EBITDA, for the past 12 months is $52.4 million, in line with the healthcare clinic industry's margin norms. It's also a relatively young company, going public late last year via a special purpose acquisition company (SPAC) in the midst of a pandemic. It's not had much of a chance to tell its story to undistracted investors.

Rising digital stock chart being drawn by a person wearing a suit.

Image source: Getty Images.

The story of the company's strategy, however, is starting to get noticed... and liked. Cano Health has made a series of acquisitions in recent months, and Credit Suisse's marks the second bullish call on the company's approach. The other price targets sit at an even higher level of $22, versus the stock's present price of less than $12 per share.

Now what

Young companies -- particularly ones that came to the market unconventionally -- that are buying their growth are difficult to handicap, leading to volatility. This one is no exception.

For investors willing to speculate a bit, though, there's potential here. The stock's 30% rout since early June leaves it more or less where it was when it first came to the market, which may be where investors are collectively drawing a mental line in the sand. It's still high-risk, but the risk seems limited relative to the reward.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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