KeyStone’s Stock Talk Podcast Episode 138

We have a busy show for you this week – in Our Case For / Case Against debate we take a look at Skylight Health Group Inc (SHG:TSX-V), which owns and operates a proprietary virtual telehealth platform, and a network of over 30 medical clinics across 16 states in the US, providing integrative, primary, and urgent care services to over 155,000 patients annually.

In our Your Stock, Our Take Segment, we answer a listener question on the very topical AstraZeneca PLC (AZN:NASDAQ), the British-Swedish multinational pharmaceutical and biotechnology company now best known for developing one of the 3 covid-19 vaccines approved for use in Europe. The vaccine is also approved for use in Canada but, to date, not in the United States. We let you know how the business looks from a fundamental perspective and if it is an opportunity or one to avoid.


Big news to start. We pushed the podcast a day forward this week because due to a very extraordinary circumstance – our very own Brennan Habetler, became an uncle – and Brennan had a very important job – watch his sister’s dog. The most important question is, have you managed to keep that dog alive?

But seriously, give us the details on the new addition – and congrats to your sister and family – I am sure the parents are ecstatic.

I have some advice – you better start enjoying the company of that dog – because both you and the dog will be getting little attention from the family anymore – you are no longer the babies of the family.


Simple Advice to Position your Portfolio for the Next Decade

KeyStones’ Simple Portfolio Building Plan – designed to enrich you, not your advisor. We show investors how to save on fees, and focus on buying great businesses (stocks) designed to grow and pay dividends over the long-term.

Spring 2021 Special Topics: 

  • KeyStone’s Market Outlook: Are the markets cheap or expensive today? Get our take on both the bull and bear case of the market and how you should position your portfolio.
  • Why 2-3 Great Investment Ideas can Change your Life: Real examples from our research in how $20,000 invested in Boyd Group (BYD:TSX) became over $2 million in 12 years & $20,000 invested in XPEL (XPEL:NASDAQ) became $697,000 in just 3 years. Find out how we uncover these great growth stocks and what to look for in a capital compounding investment such as Boyd and XPEL. 
  • Hot Topics:
    • Bitcoin – What it is and is it right for your portfolio?
    • Cannabis – Strength in the U.S. continues, are there now opportunities in Canada? Get our top Cannabis picks.
    • WallStreetBets – The good, bad and the ugly.
    • Renewables & Cleantech – Geothermal, Solar, Hydro, Wind & Nuclear Power – which are right for your portfolio?
    • Telehealth & Healthtech – The shift to online and in-home healthcare and where the opportunities may occur.
    • Are Gold Stocks right for your portfolio?
  • DIY Starter Portfolio: full details & analysis on 4-6 great stocks you can buy today. Our crisis investing portfolio from KeyStone’s April 2020 DIY Webinar has already gained 70.39%. Do not miss out on these unique, profitable growth and dividend growth stocks.
  • Live 45-minute Q&A Session: Following the Webinar with Ryan Irvine & Aaron Dunn – answering your questions on the Webinar, stock investment strategies and giving ratings on any stock in Canada or the U.S.


Case For/Case Against


Skylight Health Group Inc (SHG:TSX-V)

Price: $1.05

Market Cap: $184 million.

Skylight Health owns and operates a proprietary virtual telehealth platform, and a network of over 30 medical clinics across 16 states in the US, providing integrative, primary and urgent care services to over 155,000 patients annually. Skylight expands both organically and by way of strategic acquisitions.

Case For:

  • High growth, now profitable healthcare and health-tech business which has recently completed 5 accretive growth acquisitions paying 4-5 times EBITDA and below 1 times revenues for each.
  • Revenue run rate of $56 million up 317% from $13.4 million last year and projections for adjusted EBITDA to surge from a loss to the range of $6 million, shows a true inflection point.
  • Skylight continues with a cash position of around $7 million to fund more growth.
  • Finally, if it can continue to raise more money where the shares trade at approx. 28 times EV/EBITDA and buy growth businesses at 4-6 times that multiple, the model is highly accretive. Trades at a discount to competitors Well Health and CloudMD on an EV/Revenue basis for 2021.
  • Tremendous profitable growth – if you can find a high growth, profitable business are relatively reasonable prices in this market, jump on it.

Against Case:

  • Skylight operates clinics, telehealth and its own virtual electronic record solutions – which is hot right now but a very competitive space.
  • Skylight is just breaking into profitability, with the last two quarters being adjusted EBITDA positive. But TTM-o-TTM revenue grew at just 2% – which is alright growth, but nothing spectacular
  • Considering managements annual revenue run rate of $56 million after closing all its announced acquisitions, the company currently trades at over 3x forward revenue. Most would argue that this is not expensive for a telehealth provider… but I still find it difficult paying over 3x revenue for a business like this when I know of other healthtech providers that can possibly offer more organic growth at a valuation of just 1x sales.
  • The threat of dilution remains if the company wants to continue to support its growth by acquisition strategy. Where in the past 12 months the company has already increased its share count by approximately 80 million shares.


Your Stock, Our Take

AstraZeneca PLC (AZN: US) 

Current Price: $49.00

Market Cap: $130 billion

What does the company do?

AstraZeneca plc is a British-Swedish multinational pharmaceutical and biotechnology company with its headquarters at the Cambridge Biomedical Campus in Cambridge, England. It has a portfolio of products for major diseases in areas including oncology, cardiovascular, gastrointestinal, infection, neuroscience, respiratory, and inflammation.

Key Points:

AstraZeneca is best known for being developing one of the 3 covid-19 vaccines approved for use in Europe. The vaccine is also approved for use in Canada but, to date, not in the United States.

This company has been in the news a lot recently but unfortunately not much of that news has been good.

One would think that AstraZeneca would be in a good place right now being on of only a small handful of companies to develop a vaccine for covid-19. The situation unfortunately has been a little more complicated due to setbacks with the vaccine rollout and unforeseen side effects in a small number of individuals who received the vaccine.

Financial Review

  • The company recent reported 2020-year end results. The numbers were generally good. Revenue increased 9% and core EPS increased 15%.
  • Over the last 3 years, revenue has grown at an average rate of about 6% per year. Core EPS has been volatile and hasn’t increased relative to 3 years ago.
  • The company has provided guidance for 2021. Total Revenue is expected to increase by a low-teens percentage accompanied by faster growth in Core EPS to $4.75 to $5.00.
  • The stock trades at ~10 times expected 2021 core earnings and the balance sheet appear to be in good shape.
  • Current and historical financials aside, what larger matters with pharma companies is the growth, durability and diversity of their portfolio of medicines.
  • AstraZeneca reports 15 different drugs in its current portfolio. The top drug Tagrisso, which is used to treat lung cancer, accounts for 16% of total revenue and the top 3 drugs account for about 35% of revenue. It appears that the patent on Tagrisso doesn’t start expiring until 2032.


 Overall, the fundamentals on AstraZeneca look fairly good.

One of the challenges that I do have with these pharma companies is the complex nature of the business. To really understand the drug portfolios of these companies you almost have to be a medical expert. This is especially true when examining the pipeline of drugs under development which will be the future revenue producers of these companies.

As I said, key to analyzing a pharma company is knowing how concentrated a respective company is in its top drugs and when the patents expire. In the case of AstraZeneca, 16% of revenue from the top drug with a patent expiry of 10 years appears to be fairly robust compared to most of the major pharma companies I have been researching lately.

One thing working against the company in the near term is all of the negative press. There has been blood clotting reported in a small number of recipients of the company’s covid-19 vaccine and some EU countries temporarily stopped using the vaccine. The supply issues have also been a problem as countries have reported receiving a 1/3 of the supply that was expected.

I wouldn’t expect the covid vaccine to be much of a catalyst for any of these pharma stocks. AstraZenca’s share price has actually dropped slightly since their vaccine was approved. Pfizer who was the first to develop a covid 19 vaccine has seen a lot of volatility in its share price but no real gains. These are very large companies with billions in quarterly revenue and a few billion in short-term revenue from the covid-19 vaccines is not doing much to move the needle over the mid-term.

There is certainly a lot of smoke with AstraZeneca right now and we not running out to buy it. But the fundamentals do look reasonably good and that is something that we can research further.

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