On Wednesday, RBC (TSX:RY) Capital Markets analyst Sean Dodge increased the price target for Waystar Holding (NASDAQ: WAY) to $42 from the previous $34 while maintaining an Outperform rating on the stock. The company's stock has shown remarkable strength, delivering an 81% return over the past year and currently trading near its 52-week high of $38.34.
According to InvestingPro analysis, the company currently appears to be trading above its Fair Value. Dodge's optimism is grounded in the potential for healthcare providers to utilize software to enhance billing and collection processes, a field where Waystar is seen as a strong contender.
Dodge highlights that Waystar is poised to maintain a revenue growth rate of approximately 10% and preserve its leading EBITDA margin of around 40%. Recent data from InvestingPro shows the company has already achieved 18.23% revenue growth and maintains a "GREAT" overall financial health score of 3.04, with particularly strong momentum metrics.
This combination, according to Dodge, qualifies Waystar as a "Rule of 50" stock, meaning its combined growth rate and EBITDA margin exceed 50%, a benchmark for high-performance companies. The analyst anticipates that Waystar will sustain these metrics for at least the next three years.
The analyst identifies several potential catalysts that could further drive Waystar's performance. These include the signing of large new deals, the integration of artificial intelligence or other smart technologies, and announcements of new acquisitions. These developments could significantly impact Waystar's market position and financial success.
The revised price target of $42 is based on a multiple of 22 times the firm's estimated EBITDA for 2025. This valuation is consistent with the average of Waystar's healthcare information technology (HCIT) peers but represents a discount relative to vertical software peers, considering Waystar's comparatively lower visibility on revenue and higher leverage.
InvestingPro data reveals the company currently trades at an EV/EBITDA multiple of 26.07x, with a market capitalization of $6.45 billion. Subscribers can access 12 additional ProTips and comprehensive valuation metrics in the Pro Research Report.
Dodge's analysis and the new price target support the Outperform rating, underscoring a positive outlook for Waystar's stock as it capitalizes on the growing trend of digitalization in healthcare finance.
In other recent news, Waystar Holding Corp. has made significant strides in optimizing its financial structure. The company has refinanced approximately $1.17 billion in outstanding term loans and increased its credit line, leading to reduced borrowing costs. Moreover, Waystar's Net Revenue Retention (NRR) has shown notable growth, surpassing 20% and positioning the company prominently in the vertical software sector.
Analysts from various financial firms have recognized these developments, with Raymond (NS:RYMD) James upgrading Waystar's stock from Outperform to Strong Buy. Goldman Sachs (NYSE:GS) has also raised its price targets for Waystar, while Barclays (LON:BARC), BofA Securities, and William Blair initiated coverage, focusing on the company's consistent growth and impressive EBITDA margins.
Evercore ISI has upgraded Waystar to an Outperform rating, acknowledging the company's strong operating margins and history of organic growth.
These recent developments reflect the growing confidence of various financial firms in Waystar's potential. Investors should note that these are recent developments and they are subject to change.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.