Vocera Communications Stock: Strong Growth Points to Multi-Year Breakout

Vocera Communications Stock
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Vocera Communications on Strong Growth Path

A small-cap healthcare technology stock displaying strong technical signs of a multi-year breakout is Vocera Communications Inc (NYSE:VCRA).

My bull thesis for VCRA stock to move higher is driven by the company’s strong growth in the high-potential healthcare technology space.

Vocera Communications offers a real-time communications system designed for the clinical healthcare space, arming workers with systems, software, and communication devices to enable effective communication of vital information.

The VCRA solution is widely used by over 1,300 organizations worldwide with a potential market that is far greater.

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A look at the chart shows VCRA stock moving toward its record high of $32.97 made in September 2012.


Chart courtesy of StockCharts.com

Vocera Communications stock is trading roughly in line with the S&P 500 this year but outperformed it over the past year.

The VCRA stock chart displays the bullish cup-and-handle formation including a bullish golden cross at around $28.00.

A sustained upward move could see VCRA stock break to a new record high in the coming days or weeks if the broader stock market holds up.

My Bull Thesis for VCRA Stock

Revenues have increased sequentially in three straight years, including a 22.69% and 27.29% rise in 2016 and 2017, respectively.

Revenue ($ Millions) Growth
2013 $102.5
2014 $95.42 -6.90%
2015 $104.09 9.08%
2016 $127.7 22.68%
2017 $162.55 27.29%

The revenue growth is expected to continue for Vocera Communications at a moderate pace to 10.9% to $180.25 million in 2018 and 14.3% to $206.1 million in 2019. (Source: “Vocera Communications, Inc. (VCRA),” Yahoo! Finance, last accessed June 28, 2018.)

While the growth is lower, the expected growth rate in 2019 for VCRA is above the compound annual growth rate (CAGR) of 12.22%.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is negative but has narrowed in the past three years at a rate higher than the revenue growth rate.

EBITDA ($ Millions) Growth
2013 ($8.02)
2014 ($24.51) -205.67%
2015 ($13.52) 44.82%
2016 ($7.39) 45.39%
2017 ($6.38) 13.65%

Vocera Communications has recorded generally accepted accounting principles (GAAP) losses in five straight years, but the loss has declined in three straight years as revenues grew.

  GAAP Diluted EPS
2013 ($0.43)
2014 ($1.12)
2015 ($0.66)
2016 ($0.64)
2017 ($0.50)

A positive thing to note is that Vocera Communications managed to report adjusted earnings of $0.33 per diluted share in 2017.

For 2018, VCRA is estimated to drive earnings to $0.46 per diluted share and as high as $0.54 per diluted share, representing potential growth of 63.65%.

What’s impressive is that Vocera Communications could increase its adjusted earnings to $0.71 per diluted share in 2019 with a high estimate of $0.88 per diluted share. The high estimate represents potential growth of 91.3%. (Source: Ibid.)

This year is sitting up to be good after VCRA stock’s 180% earnings beat in the first quarter that followed a 107.10% beat in the fourth quarter.

The balance sheet is strong with $82.0 million in cash and minimal debt.

Free cash flow (FCF) turned positive in 2016 and 2017 including strong growth in 2015 and 2016.

Free Cash Flow ($ Millions) Growth
2013 ($5.03)
2014 ($6.71) -33.51%
2015 ($1.29) 80.85%
2016 $6.56 610%
2017 $4.9 -25.26%

Analyst Take

The potential earnings growth looks impressive for Vocera Communications.

The fact that company insiders bought a net 235,490 of shares over the past six months is bullish and offers some confidence in VCRA stock.