CareCloud Inc: Cheap, Tiny Health-Care Tech Stock Can Double

Demand for Health-Care Tech Bodes Well for MTBC Stock

The demand for health-care technology solutions will be massive as the sector undergoes a continuous transformation.

A compelling micro-cap play on the application of technology in the medical field is CareCloud Inc (NASDAQ:MTBC), a developer of cloud-based solutions for hospitals and other health-care providers in the U.S.

CareCloud stock is down by 41% from its 52-week high, despite the company’s strong tailwinds and growth prospects.

The below chart shows MTBC stock entering a death cross pattern, which is a bearish crossover pattern that appears when the 50-day moving average breaks below the 200-day moving average.

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CareCloud stock is currently holding in a base formation, which is sometimes a precursor to an upside move. My view is that the selling of MTBC stock has been excessive, and that it provides traders with an aggressive risk/reward opportunity.

Chart courtesy of StockCharts.com

Strong Revenue Growth & Profits on CareCloud Inc‘s Horizon

CareCloud consistently delivered double-digit-percent revenue growth in the last four years, to a record $105.1 million in 2020. The company’s revenue compound annual growth rate (CAGR) for the period was an impressive 44%.

Moving forward, CareCloud Inc’s revenue growth rate is expected to normalize. This is what we would expect as the company’s revenue base grows.

Even so, analysts estimate that CareCloud will ramp up its revenues by 30.0% to $136.6 million this year and by 13.2% to $154.6 million in 2022. (Source: “CareCloud, Inc. (MTBC),” Yahoo! Finance, last accessed November 3, 2021.)

Fiscal YearRevenue (Millions)Growth
2016$24.5N/A
2017$31.829.9%
2018$50.658.9%
2019$64.427.5%
2020$105.163.1%

(Source: “CareCloud Inc.” MarketWatch, last accessed November 3, 2021.)

In the past four years, CareCloud pumped out positive earnings before interest, taxes, depreciation, and amortization (EBITDA), increasing its EBITDA to a record $7.2 million in 2020.

Fiscal YearEBITDA (Millions)Growth
2016-$3.5N/A
2017$234.8106.7%
2018$632.3169.3%
2019$4.9694.7%
2020$7.244.7%

(Source: Ibid.)

CareCloud Inc’s earnings-per-share (EPS) profitability based on generally accepted accounting principles (GAAP) remains absent, but its GAAP diluted EPS losses have been narrowing.

Watch for the company to cut its loss to $0.94 per diluted share this year, followed by a loss of $0.31 per diluted share in 2022. (SourceYahoo! Finance, op. cit.)

Fiscal YearGAAP Diluted EPSGrowth
2016-$0.95N/A
2017-$0.6927.4%
2018-$0.5913.9%
2019-$0.60-1.1%
2020-$1.79-198.1%

(Source: MarketWatch, op. cit.)

The company’s free cash flow (FCF) is a work in progress, but CareCloud Inc managed to report positive FCF for 2018 and 2019.

Fiscal YearFCFGrowth
2016-$1.4 MillionN/A
2017-$415,57069.5%
2018$5.8 Million1,491%
2019$5.1 Million-12.5%
2020-$3.5 Million-168.8%

(Source: Ibid.)

Analyst Take

While institutional investors are shy about adding a micro-cap stock to their portfolios, insiders have been actively buying CareCloud stock. Over the last six months, insiders added a net 3.6 million shares. (SourceYahoo! Finance, op. cit.)

The bullish tailwinds in health-care technology provide optimism for CareCloud Inc. As such, the company’s forward valuation is extremely attractive.

CareCloud trades at 0.8 times its consensus 2021 revenue estimate and 0.7 times its 2022 revenue estimate. The fact that MTBC stock trades at such a low multiple to its forward revenues makes the bull case even more reasonable.