Dedicare Stock Analysis:
In this stock analysis, I will go through Dedicare's finances, strategy, their operations, and some thoughts on where they stand in the future, including aspects to watch for, strengths and weaknesses, as well as the dividends Dedicare distributes.
What Dedicare Does
Dedicare's operations focus on recruitment and staffing within the healthcare sector, life sciences, social services, and preschool services in Norway, Sweden, Denmark, and Finland. They are working to increase their exposure in the United Kingdom as the next growth area.
This means they have doctors, nurses, social workers, kindergarten staff, and psychologists in their workforce portfolio.
They are exposed to both the private and public sectors, ensuring better pay in the healthcare sector, and giving smaller municipalities the opportunity to bring in employees who can support their healthcare sector in Norway.
An example of this is Moskenes municipality, which recently declared bankruptcy, where it's mentioned that A) it's difficult to find relevant personnel, and B) the personnel they hire on lease are too costly.
I have not confirmed whether Moskenes has rented from Dedicare
In short, they are involved in the recruitment and staffing of qualified personnel within various segments.
And offer special services towards health, care, and development.
Dedicare's Strategy
In this stock analysis, I've also identified Dedicare's strategy as focusing on five key areas:
Attractive Employer: They strive to be the top employer within their focused segments, with an emphasis on quality, development, and retaining their best workers.
Attractive Customer: They aim to be the first choice for consultants and candidates by offering a wide range of assignments and competitive conditions.
Market and Service Development: Actively work to build new customer segments, enter new geographical areas, and job categories in healthcare.
Operational Efficiency: Continuous focus on keeping costs down and having scalable solutions.
Customer and Social Benefit: By building expertise, Dedicare helps to provide skills within the healthcare sector, ensuring a more sustainable healthcare system, especially towards smaller municipalities where it is hard to find labor.
A Bit About Finances
Generally, I can see that Dedicare has experienced significant growth since it was listed on the stock exchange. I have only fetched data back to 2016*.
Their finances especially improved from 2020 --> 2023, but now in Q1 2024, they have encountered quite strong resistance in growth. EPS fell by 50%, due to heavy competition in Norway, while Sweden and Denmark experienced some contract limitations leading to
significant revenue drops in Q1.
I can also see that they are quite dependent on certain customers.
For example, larger cities and areas account for a significant portion of Dedicare's revenue, so in this area, they appear to be poorly diversified.
Overall, there has been good economic growth since 2016, with a Q1 in 2024 that does not indicate easy continued growth.
Statement
With a top-line growth of over 3*, Dedicare has proven that they have managed to significantly increase their sales, and they have also managed to maintain their bottom line to some extent, but a lower margin indicates that growing bigger comes at a cost.
With margins varying from 10 - 2%, there's greater uncertainty in the picture, especially when looking at the trend since 2016.
I feel the margins are weak and hope this is something they will address going forward.
The bottom line has doubled since 2016, but the start of the year gave no good indication that 2024 would be strong; this led to the company dropping significantly in value.
Except for Q1 and generally low margins, I believe the statement stands fairly well.
Net Income | EBIT | Results | Margin | EBIT margin | |
2016 | 650.1 | 69.5 | 52.9 | 8.14% | 10.69% |
2017 | 785.2 | 77.4 | 60.1 | 7.65% | 9.86% |
2018 | 812 | 50.2 | 38.2 | 4.71% | 6.19% |
2019 | 776 | 35.3 | 26.4 | 3.41% | 4.55% |
2020 | 885.2 | 43.8 | 36.1 | 4.07% | 4.95% |
2021 | 1249.9 | 87.8 | 65.6 | 5.25% | 7.02% |
2022 | 1788.6 | 135.9 | 101.3 | 5.66% | 7.60% |
2023 | 1994.1 | 148.4 | 110.4 | 5.54% | 7.44% |
2024q1 | 431.5 | 15.1 | 10.5 | 2.43% | 3.50% |
Balance
They are in a solid liquidity position when it comes to cash assets, with 200 million; Dedicare is well-prepared to pay off all debt, invest further, or stand on solid ground to withstand adversity for a period. In 2023, they distributed 53 million in dividends, so there is a substantial amount in the bank here.
The debt is around 80-100 million and can be easily managed as mentioned.
Currently, Dedicare is valued at 564 million SEK, which is about 40% higher than its asset value.
I think the balance sheet looks quite acceptable; this is a typical company with low asset value, and it's the liquidity that boosts this. Generally low debt and good control.
Debt | Equity | Total Assets | Cash | Interestbearing debt | |
2016 | 110.6 | 121.7 | 232.3 | 83.7 | 0 |
2017 | 123.6 | 109.5 | 233.0 | 93.7 | 0 |
2018 | 113.4 | 102.4 | 215.8 | 58.2 | 0 |
2019 | 146.1 | 93.1 | 239.2 | 62.7 | 14.6 |
2020 | 249.2 | 135.4 | 384.6 | 100.3 | 40.9 |
2021 | 319.4 | 178.5 | 497.9 | 132.4 | 33.5 |
2022 | 480.1 | 262.6 | 742.7 | 142.8 | 116 |
2023 | 417.4 | 309.9 | 727.3 | 187.1 | 88 |
2024 | 370.7 | 356.2 | 726.9 | 202.3 | ? |
Cash flow
Good growth in operations indicates that money is entering the system. Even in weak quarters, it's evident that cash is flowing in; they have incurred debt for growth, and it appears to have worked out well for them.
The cash flow looks strong, and I have no complaints here!
Operations | Investments | Finances | Dividend | |
2016 | 35.2 | -0.6 | -36 | -36 |
2017 | 82.2 | -0.3 | -71 | -72.4 |
2018 | 18.6 | -4.6 | -49.6 | -45.3 |
2019 | 46.9 | -1.7 | -41.1 | -36.2 |
2020 | 40.1 | -26.5 | 25.8 | 0 |
2021 | 69.6 | -2.3 | -36.7 | -23.5 |
2022 | 105.3 | -68.6 | -30.1 | -38.1 |
2023 | 145.4 | -9.6 | -81.8 | -57.4 |
2024 Q1 | 21.6 | -0.9 | -6.1 | 0 |
Strengths of the Stock
Experience and Reputation: Generally, Dedicare has a good reputation, and in Norway, they have been rated as Norway's best employer.
Diversified: They are spread across four sectors in Norway, all of which relate to health or care in some way. There's always a high demand for preschool teachers (based on finn.no) or nurses and doctors everywhere.
High Customer Satisfaction: Customers are very satisfied, and 98% of Dedicare's customers have indicated that they would like to use Dedicare in the future.
High Dividends: Dedicare provides an annual dividend in the April/May period, which is typically 4-6%.
Weaknesses of the Stock
Heavily Dependent on Public Contracts: Dedicare is in a position where they could lose contracts, which could lead to weaknesses in revenue.
Politically Unwanted: Several countries politically wish to eliminate temporary positions, making this a company that some politicians do not want to exist.
Qualified Personnel: If competitors emerge, they could lose relevant personnel and face difficulties.
Q1 2024: Even though Dedicare claims that a rotten market does not affect their revenue, they experience uncertainty related to new contracts and lack of rentals due to competition, new budgets, etc.
What to Watch For:
Political Risk: Increased negativity from politicians could create difficulties for further growth in Nordic countries. Budget changes and the desire for more permanent employees (currently happening in Sweden).
Winning New Contracts: Lately, Dedicare has had problems winning contracts with larger areas (as mentioned) and this needs to be monitored.
Future Revenue: With a P/E of 5-6, the company itself isn't very expensive, but if the bottom line continues as it is and EPS is at 1 SEK (or less), the price of the company could quickly reach a P/E of 10-15. Therefore, if the company continues to perform as it does, they are actually not cheap.
Brief Summary:
A company that recently faced resistance after considerable growth during a period that has been difficult for many other companies.
They have shown that high interest rates do not matter when they deliver personnel to the public sector and some private sectors. They are in areas where employees are always needed almost regardless of technological advances and have remained steady in the current situation. They are in a politically uncertain situation because the company is based on temporary positions, but make money regardless. It is difficult to know where they will be in 1-2 years, but if they manage to grow further in Great Britain, this could lead to unexpected upturns.
Overall, I feel the company is somewhat weak; they have a business model that is easy to replicate, and with competitive advantages, such as being the best employer, this can quickly change with poor management.
Based on how 2024 is unfolding, Dedicare seems to be in a difficult situation in terms of value, and I feel that they are not worth more than the current price at the moment, and even that price carries risk.
I hope you liked my analysis of Dedicare!
If you wish to delve deeper into the numbers, you can find the stock on my index page, where I have given Google Sheets read access for those who are interested.
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