On Friday, Biote Corp (NASDAQ:BTMD) shares received an optimistic update from a Roth/MKM analyst, who increased the company's price target to $12.00 from $10.00, while reiterating a Buy rating on the stock.
The revision follows Biote's announcement yesterday after the market close (AMC) of a binding term sheet with Marci Donovitz to settle litigation. As part of the settlement, Biote will repurchase approximately 8.3 million shares for $60 million over the next three years, at fixed prices averaging $7.23 per share. Additionally, Marci Donovitz's 4.0 million earnout shares will be canceled.
This repurchase agreement, combined with a previous share repurchase from Dr. Gary Donovitz in February, means Biote has now repurchased a total of 26.7 million shares and canceled 8.0 million earnout shares for $136.9 million.
The analyst's updated estimates take into account these planned share repurchases, which are expected to slightly increase earnings per share (EPS) in fiscal years 2024 and 2025. If the entire share repurchase was modeled today, the EPS is projected to surpass $1.00 in fiscal year 2025.
The analyst also provided insights into Biote's financial health, predicting that net leverage would peak at 1.5 times the last twelve months' (LTM) EBITDA in the second quarter of 2024 and decrease to below 1.0 times by the end of 2025. These projections are based on the assumption that the entire planned share repurchase is conducted over the three-year period.
The move to repurchase shares is viewed positively by the analyst, suggesting it reflects confidence in Biote's business and could potentially increase the likelihood of the company being sold.
The new price target of $12.00 is based on an 8.3 times multiple of Biote's forecasted fiscal year 2025 EBITDA, which corresponds to an 11.9% free cash flow (FCF) yield.
The valuation also considers a pro forma capital structure for the full planned share repurchase. The analyst highlighted that at 5.6 times the forecasted fiscal year 2025 EBITDA, Biote is trading at a significant discount compared to its public company peers.
In other recent news, Biote Corp. has been the focus of several significant developments. The company recently announced a share repurchase agreement with Marci Donovitz, involving a $60 million buyback over the next three years. This action is part of a larger buyback plan that includes a previous agreement with Gary Donovitz.
The combined agreements will result in Biote Corp. buying back a total of 26.7 million shares, effectively reducing the company's total share count by approximately 41%. Truist Securities has maintained a 'Buy' rating on Biote Corp. stock, reflecting confidence in the company's financial strategy.
Additionally, Biote Corp. has reported strong first-quarter 2024 results, leading Roth/MKM to maintain a 'Buy' rating and increase the stock price target to $10. The company's financial performance, marked by a sequential increase in procedure revenue and robust profit margins, has been positively received by analysts.
Lastly, Biote Corp. reached a settlement with its founder, Dr. Gary S. Donovitz, concluding a period of litigation. The agreement includes a share repurchase plan where Biote will buy back all 18.4 million shares held by Donovitz for approximately $76.9 million.
The company's CEO, Terry Weber, expressed confidence in the company's financial position to execute this multi-year share repurchase, aiming to enhance shareholder value.
InvestingPro Insights
In light of the recent developments and analyst updates on Biote Corp (NASDAQ:BTMD), a closer look at real-time data and InvestingPro Tips can provide additional context for investors. The company's market capitalization stands at $359.82M, reflecting investor sentiment and market recognition. From an earnings perspective, Biote's P/E ratio is currently 40.64, but more importantly, the adjusted P/E ratio for the last twelve months as of Q1 2024 is significantly lower at 17.02, indicating potential undervaluation relative to near-term earnings growth—a point underscored by one of the InvestingPro Tips highlighting the company's low P/E ratio in this context.
The company's financial health is also a point of interest, with liquid assets surpassing short-term obligations, suggesting a strong liquidity position. Additionally, Biote operates with a moderate level of debt, which aligns with the analyst's prediction of a net leverage peak and subsequent decrease. This is further corroborated by the company's positive revenue growth of 8.49% over the last twelve months as of Q1 2024, indicating a steady upward trajectory in Biote's financial performance.
Investors may also take note of the robust price performance, with an 18.67% increase over the last month and a 30.89% uptick over the last six months, as this could reflect underlying market confidence in the company's prospects. Moreover, the InvestingPro platform lists additional tips, including the anticipation of net income growth this year and a prediction of profitability, which are valuable insights for potential investors. For those interested in a deeper analysis, InvestingPro offers even more tips, and using the coupon code PRONEWS24 grants an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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