Analysts from financial services firm Taylor Collison recently released a report that reiterated their buy rating on Mach7 Technologies Ltd (ASX: M7T). Here's why analysts think this ASX tech stock is poised to rocket in 2020 and beyond.
What does Mach7 do?
Mach7 provides digital data management solutions for hospitals that allow a clear and complete view of patient records. The company's flagship Management Studio platform aims to improve diagnosis delivery, reduce care delivery delays and costs, and improve patient outcomes.
Mach7's Vendor Neutral Archive is essential to the company's core enterprise imaging solutions for physicians and radiologists. The company also sells picture archive and communications systems and has 2 revenue models in software as a service and upfront licensing.
Mach7 currently employs more than 40 staff in the US and Asia-Pacific region and the company estimates that it has a global addressable market worth in excess of $US3 billion. According to Mach7, the advantages of its technologies include customers controlling their own data, ease of installation, low hardware requirements, and an attractive price point.
How has Mach7 performed?
Recently, Mach7 provided the market with its second-quarter report for FY20. The company saw its second consecutive quarter of positive cash flow with $0.5 million reported for the second quarter of FY20.
Other highlights of the Mach7 quarterly report included $3.6 million in cash receipts and a successful capital raise of $20 million. The company also managed to extend contracts with 7 existing customers and signed 2 new clients in the second quarter.
Broker note
Analysts from Taylor Collison reiterated their buy rating on Mach7 with a high level of conviction on the company's outlook. With Mach7's upgrade on expected cash flow for FY20, analysts lifted their price target for the company to $1.17.
Analyst forecasts included additional contract wins with large institutions over the next 12 months and cited Mach7's strong pipeline of opportunities. Quarterly cash receipts are expected to remain volatile, however, free cash flow is expected to be sustainable over the medium to long term.
Using 3-year consensus forecasts, analysts also think that Mach7 remains significantly undervalued in comparison to the likes of Pro Medicus Limited (ASX: PME) and Volpara Health Technologies Ltd (ASX: VHT).
Should you buy?
The Mach7 share price has surged more than 30% since the start of 2020 and is well-poised for further upside as it trades near 52-week-highs. In my opinion, companies offering auxiliary services to the health sector have tremendous opportunities with lucrative addressable markets.
Although the research from Taylor Collison is highly regarded, I think it would be risky for investors to jump the gun and buy shares in Mach7. Instead, I think a prudent strategy would be to keep Mach7 on your ASX watchlist and do your due diligence before making an investment decision.
