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Here’s why the Healthia (ASX:HLA) share price is racing higher

increase in asx medical software share price represented by doctor making excited hands up gesture
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The Healthia Ltd (ASX: HLA) share price has been a strong performer on Tuesday.

In afternoon trade, the shares of the integrated group of health-based companies are up 5% to $1.81.

Why is the Healthia share price surging higher?

Investors have been buying Healthia’s shares this afternoon following the release of a market update.

According to the release, based on unaudited accounts, the company is expecting to report strong revenue and profit growth for the first half of FY 2021.

In respect to the top line, Healthia is expecting to report revenue of $62 million to $64 million for the period. This will be an increase of 40% to 45% on the prior corresponding period. This was driven by organic revenue growth of 14.5% and the benefits of acquisitions.

Things are expected to be even better for its earnings for the first half due to a significant improvement in its earnings before interest, tax, depreciation and amortisation (EBITDA) margin.

The company’s EBITDA margin is anticipated to improve by 425 basis points to 527 basis points, driving its underlying margin to 17.26% to 18.26%.

This is expected to underpin an 86% to 103% increase in EBITDA to the range of $10.7 million to $11.7 million for the half.

On the bottom line, the company is forecasting underlying net profit after tax before amortisation (NPATA) of $4.5 million to $5 million. This will be an 85% to 106% increase over the same period last year.

Underlying earnings per share is expected to increase at a slightly slower (but impressive) rate of 69% to 88% for the half. This is due to its increased share count following capital raisings.

Management commentary

Healthia’s Managing Director, Wesley Coote, commented: “With strong organic growth during the period, and the completion of a number of strategic acquisitions over the last 12 months, including settlement of The Optical Company on 30 November 2020, we expect to see underlying EBITDA for the period ending 31 December 2020 in the range of $10.7 million to $11.7 million. This represents an expected increase in underlying EBITDA in the range of 86% to 103% over the prior period.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended HEALTHIA FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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