Home Articles Why Volpara Health Shares (ASX VHT) Is A Stock To Buy

Why Volpara Health Shares (ASX VHT) Is A Stock To Buy

Home Articles Why Volpara Health Shares (ASX VHT) Is A Stock To Buy

Why Volpara Health Shares (ASX VHT) Is A Stock To Buy

by Henry Fung - Partner Managing Director

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 the breast screening detection and the flow of information between doctor 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.

Volpara Health Shares (ASX VHT)

VHT used the proceeds of a recent $20 Million capital raising completed in June 2018 to fast-track its expansion into the US market and continue its investment into its research department based in New Zealand. The recent capital raising has allowed the company to employ a sales team located in the US, this allows the company to take advantage of changes in legislation.

Volpara Health moves to SaaS model

Volpara Health Technologies provides a cloud-based system that speeds up the screening process by using artificial intelligence imaging algorithms to assist clinicians in the early detection of breast cancer. The images are then shared in the cloud with doctors to help determine if further screening is required.

Volpara Health Shares (ASX VHT) - Cloud

VHT has adopted a Software As A Service (SaaS) business model, which give the company revenue predictability over the long term. For those unfamiliar with the SaaS business model, it is designed around charging recurring fees on a monthly or quarterly basis instead of charging a one-off lump sum payment.

The SaaS business model is becoming ever more popular with many major companies adopting this business model. If one was to think back to the 1990’s and early 2000’s, when someone wanted to get the latest version of Microsoft products (word, excel) for example, they would go to the shop and pay a one-off fee and leave with a floppy disk to install the latest version. They would then have to repeat this process every few years. Now you sign up for Microsoft suite of products and get charged a small monthly fee which all the latest changes updated every month.

SaaS revenue growth +1,945%

VHT adoption of the SaaS business model was announced in the recent AGM presentation. The SaaS model has seen revenue increase at an astonishing rate of 1,945%. That kind of increase in revenue is expected from a low base and will be hard to sustain, but it is still a significant move in the right direction.

Volpara Health Shares (ASX VHT) - Revenue

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 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, producing a Volpara scorecard that includes density, dose and pressure for each exam allowing EQUIP requirements to be met.

To add to the above, 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 shares growing revenues quickly

Increasing profits and contract value from expansion into the US Market has seen the Net Loss drop by 8% and will continue to fall as the rapid expansion continues into the US & UK Sectors.

VHT’s strong revenue growth is a sign of things to come. If they can continue on the same growth trajectory, VHT’s share price could potentially have a lot of upside.

The potential over the next couple years for Volpara Health shares is strong, considering expenditure on health care, mortality rates for women with cancer, and the size of the healthcare industries. A growing VHT is well positioned to take advantage of this growth.

Volpara Health Shares Have Strong Upside

Overall, Volpara Health shares looks like a good stock to buy with strong growth potential. However, In the short term the company is not cash flow positive and sustained profit is some way in the future. Additionally, staying ahead of any competitors will require sustained investment going forward in the underlying technology.

What are your thoughts? Leave us a comment below.

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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.

Henry is a co-founder of MF & Co. Asset Management with over 12 years experience as a trader, investor and asset manager. Henry’s focus is on High Net Worth Wealth Management and using algorithmic quantitative trading systems to invest for his clients. Henry also trains new Interns and Advisers on trading and risk management.

Henry is a co-founder of MF & Co. Asset Management with over 12 years experience as a trader, investor and asset manager. Henry's focus is on High Net Worth Wealth Management and using algorithmic quantitative trading systems to invest for his clients. Henry also trains new Interns and Advisers on trading and risk management.