Today we’ll show you why we think Volpara Health Technologies (ASX VHT) is a great stock to buy.
In fact, VHT shares were a stock we got our clients into during September 2018, when the VHT share price was at around $0.80.
The VHT share price last traded at about $1.40, a good 75% gain in just a few months.
Volpara is a leading breast screening software provider and first-to-market.
Not only that, FDA has announced breast screening will now be mandatory, making their product crucial.
This is why we like VHT shares.
About Volpara Health Technologies (ASX VHT)
Volpara Health Technologies Ltd (ASX VHT) is a New Zealand-based healthcare research, and development company with global scalability.
The company provides medical software, specialising in managing breast screening and detection.
Their software automates the flow of information between the doctor and the clinic taking the screening mammogram x-ray.
Even though the company started life in New Zealand, it operates in all major global markets.
Volpara Health Technologies has significant growth potential in the future through expansion into the US market.
FDA Announces Mandatory Breast Screening [29th March 2019]
The United States Food and Drug Administration (FDA) recently announced that the US is to introduce mandatory reporting of breast density under proposed new regulations.
This is extremely positive and comes on the backend of mild HY19 results.
Though the company saw growth and positive financials during the HY19 year results, it didn’t meet market expectations.
This put a lot of pressure on the VHT share price.
However, the announcement of mandatory reporting indicates a positive future for the company.
With the announcement, the VHT share price rallied around 13% on the day.
We believe Volpara has a lot of potential upside and will be an industry leader in the long-term.
Volpara Health moves to SaaS model
Volpara Health Technologies (ASX VHT) provides a cloud-based system that speeds up the screening process.
Their system uses artificial intelligence imaging algorithms to assist clinicians in the early detection of breast cancer.
The doctors then retrieve images which are shared in the cloud. They are then able to determine if further screening is required.
Volpara Health Technologies has adopted a Software As A Service (SaaS) business model. This gives the company revenue predictability over the long term.
Volpara can achieve predictable revenue via recurring fees charged on a monthly or quarterly basis.
This is in contrast to asking for an upfront lump-sum payment for most software packages.
The SaaS business model is becoming ever more popular with many major companies adopting this business model.
SaaS revenue growth +1,945%
Volpara Health Technologies (ASX VHT) adoption of the SaaS business model was announced in its recent AGM presentation.
The SaaS model has seen revenue increase at an astonishing rate of 1,945%.
However, that kind of increase in revenue is expected as it comes from a low base. It will be hard to sustain, but it is still a significant move in the right direction.
SaaS system passes regulatory requirements with flying colours
The US the Food and Drug Administration (FDA) recently announced the Enhancing Quality Using the Inspection Program (EQUIP).
In simple terms, this new regulation means that clinics must continually review the quality of the imaging.
This is to make sure it is meeting the standards set by the Mammography Quality Standards Act (MQSA).
The Volpara Enterprise clinical applications provide quick, automated assessment of every exam.
The system then produces an EQUIP qualified a scorecard that includes density, dose and pressure for each exam.
Additionally, Volpara Health will also begin its trial period of UK PROCAS II project.
This will have the potential to cover two million women per year, as the NHS breast cancer screening programme is one of the largest in the world.
If the trial period goes correctly, it will enable them to obtain an EU General Data Protection Regulation Certificate (GDPR).
To obtain such a certificate is not easy, but if they do so, will allow them to expand into the European Market.
Volpara Health (ASX VHT) has seen increasing profits and contract value from expansion into the US Market.
This has helped the Net Loss drop by 8% and will continue to fall as the rapid expansion continues into the US & UK Sectors.
VHT shares’ strong revenue growth is a sign of things to come. If they can continue on the same growth trajectory, the VHT share price could potentially have a lot of upside.
The potential over the next couple years for Volpara Health shares is strong.
Expenditure on health care, mortality rates for women with cancer, and the size of the healthcare industries are growing.
Overall, Volpara Health Technologies (ASX VHT) looks like a good stock to buy. We feel there is a lot of upside potential in the VHT share price.
However, Volpara will need to grow its revenue to reach positive net cash flow positive and sustained profits.
Additionally, staying ahead of any competitors will require sustained investment going forward in the underlying technology.
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This is general advice only. MF & Co Asset Management has not considered your personal financial needs, objectives or current situation. This information is not an offer, solicitation, or a recommendation for any financial product unless expressly stated. You should seek professional investment advice before making any investment decision.