Medical Facilities Corporation

Stocks
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A couple of months ago, I came across a Canadian company called Medical Facilities Corporation (Ticker: DR.TO). The company owns, in cooperation with doctors, 4 surgical hospitals (?) in the USA. Directly copied from the company’s investor presentation: “ MFC’s ownership includes controlling interest in three specialty surgical hospitals and an ambulatory surgery center (“ASC”).” Link to the investor presentation: https://www.medicalfacilitiescorp.ca/assets/mfc/documents/MFC%20Investor%20Update%20-%20August%202025.pdf

The company’s market capitalization is approximately 275 million Canadian dollars (= 197 million USD). The company reports financial data in US dollars.

Some financial figures from the last four years (I took the figures from Yahoo Finance):

  • Operating income (mUSD): 63.9 - 49.2 - 51.5 - 77.4
  • Free cash flow (mUSD): 76.2 - 56.7 - 50.3 - 67.2

After the latest quarter, the company has cash or equivalents of 49 mUSD, interest-bearing debt and lease liabilities of 68 mUSD, meaning an enterprise value of approximately 216 mUSD. Roughly calculated, EV/NOPAT = 4.5 with the four-year average operating income.

Dividend yield 2.4% and the company has been aggressively buying back its own shares. In 2021, there were 31 million shares, now less than 19 million.

A couple of months ago, I bought a small tracking position. Then I wondered what the catch was, how could it be so cheap? I bought more. Now I’m still wondering if I’ve missed something important and made a beginner’s mistake. Can someone smarter explain why this is so cheap? Or is it just a so-called discovery/find?

This is not investment advice.

Edit. I corrected the EV/NOPAT value.

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I don’t know the company at all, so take this with a grain of salt: you surely have a better understanding of the company! A quick glance at the numbers side only:

The company’s revenue seems to have stagnated quite a bit since 2014. Forecasts for the next two years also do not promise growth (growth predicted around 1% YoY until 2027).

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Declining EPS is forecast for the next two years. 2027e EPS 0.9USD, at which point P/E 11x. In my opinion, not a glaringly cheap price for a company that, according to forecasts, is not growing or improving its own earnings.

It is interesting, of course, if the company buys back its own shares: they must see something there! :slightly_smiling_face:

Have you found any driver that would unlock hidden value? Through earnings, it seems to come agonizingly slowly.

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Okay, hands up for a rookie mistake. It wasn’t that cheap after all, when minority interest eats up a large part of the bottom line.

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