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Investing.com - Stifel has raised its price target on Definitive Healthcare Corp (NASDAQ:DH) to $6.00 from $5.00 while maintaining a Buy rating, citing improved customer retention and strategic initiatives showing early positive results. According to InvestingPro analysis, the stock appears undervalued at its current price of $3.97, with analysts setting targets between $3.00 and $5.00.
The healthcare data company reported revenue down 5% year-over-year but exceeded the high-end of guidance and consensus expectations, while achieving EBITDA margins of 31%. With an impressive gross profit margin of 83.4% and EBITDA of $43.8 million in the last twelve months, the company maintains strong profitability metrics despite challenges. Management’s guidance for 2025 indicates relatively flat revenue compared to Q1 levels throughout the year, reflecting the company’s concentration of renewals and bookings in the December/January timeframe.
Definitive Healthcare has been focusing on four strategic initiatives: data quality, integration, customer engagement, and facilitating digital interactions. According to Stifel, these efforts are beginning to show "green shoots" of improvement, with the second quarter demonstrating the highest retention levels since Q2 2024, despite being seasonally weak for renewals.
Management reiterated expectations for modest year-over-year net revenue retention declines in 2025, which informs Stifel’s 2026 revenue growth forecast of 2.5%, slightly higher than the previous consensus of 2%. The company also expects non-GAAP operating expenses to stabilize in the low-$30 million range.
Stifel noted that Definitive Healthcare is currently trading at 11 times free cash flow, and while the firm is encouraged by management’s actions to reaccelerate growth and improve profitability, it acknowledges the valuation reflects "the absence of near-term catalysts." InvestingPro data reveals a strong free cash flow yield and indicates that net income is expected to grow this year. Get access to 8 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.
In other recent news, Definitive Healthcare reported its first-quarter earnings, revealing a revenue of $59.2 million. This figure surpassed both BTIG’s estimate of $56.6 million and the consensus estimate of $56.2 million, although it marked a 7% decrease compared to the previous year. The company’s adjusted EBITDA for the quarter was $14.7 million, exceeding BTIG’s and consensus estimates but showing a significant 26.5% drop year-over-year. Definitive Healthcare also reported an adjusted net income of $7 million, or $0.05 per share, which exceeded the high end of its guidance.
Following these earnings results, BTIG analysts downgraded Definitive Healthcare’s stock from Buy to Neutral, citing concerns about year-over-year declines and ongoing market challenges. Additionally, the company announced a change to its board of directors as Jill Larsen resigned due to increased responsibilities at her current employer, with Scott Stephenson appointed in her place. The company clarified that Larsen’s resignation was not due to disagreements with its operations, policies, or practices. These developments highlight the company’s recent financial and organizational changes.
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