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Pharmacy benefits manager Catamaran Corp. is likely to venture back into acquisitions, with analysts at Cantor Fitzgerald saying after spending time with management that it's very likely the company will do a couple of purchases.
Catamaran has stated publicly that it plans to keep buying after integrating two large acquisitions last year.
"You should expect us to continue to be active," chief financial officer Jeffrey Park said on the company's fourth-quarter conference call.
Cantor hosted Catamaran executives for meetings in Montreal and said management reiterated that message. The Cantor analysts came away away with the view that "there is a high probability that management will complete one or two acquisitions this year. Catamaran has both the management and financial bandwidth to complete a small to mid-sized acquisition."
Catamaran produces a huge amount of free cash flow, enabling it to to pay down debt and make purchases. In the last twelve months, the company threw off $469-million (U.S.) free cash flow, up from $209-million in 2012. By 2015, the analyst consensus is that free cash flow will increase to $589-million.
So while debt has climbed to about $1.45-billion, Catamaran has no trouble handling it.
Cantor currently forecasts that Catamaran's enterprise value (equity plus debt) will be 10 times its earnings before interest, taxes, depreciation and amortization in 2015, down from 14 times last year.