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  5. CRRX: Looking for an updated opinion on this unfortunate pick of mine. [CareRx Corporation]
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Investment Q&A

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Q: Looking for an updated opinion on this unfortunate pick of mine. Held in a registered account so not even a tax loss benefit. Your views as to potential would be appreciated.
Asked by Robert on November 09, 2023
5i Research Answer:

CRRX has been on a downward trend year-to-date displaying a loss of -40% in share price with a market cap now at $89.48M. EPS came in at a loss in Q3, but earnings have outperformed or matched analysts’ quarterly estimates throughout FY2023. In Q3 total revenue and adjusted EBITDA both displayed low single digit declines year-over-year along, while recording a Net Loss of ($1.8M). Declines across these metrics was driven by the offboarding of a customer contract in the prior year. CRRX has a high total debt balance at $136.2M representing 6.1x EBITDA in FY2023. CRRX uses average beds serviced as a key performance indicator, currently at 93,906 for Q3 displaying a slight decline from Q2. CRRX announced a new CEO at the end of May 2023. Price-to-sales ratio is very low at 0.2x, but we are not comfortable with CRRX due to the operational risks displayed. With its small size, losses, high debt and uncertainty on the management change, in addition to possible tax-loss selling, we can't endorse it.