SXC Health Solutions Corp. is up 21% after Wednesday's earnings results beat expectations and guidance was also better-than-expected.
Scott Rattee, CI Capital Markets analyst, thinks the surge has legs, raising his rating to Outperform and target price to US$72 from US$54.
"While FY10 revenue guidance was above consensus expectations, we believe earnings guidance is highly conservative as it only reflects business that SXC has already won, he said in a note to clients.
"We anticipate SXC to continue to win business during the year."
With a P/E multiple of 20.3x, SXC is trading above it health caer peer group average of 18.01x. However, Mr. Rattee continue to target a multiple of 25x for the company.
"We believe SXC's 12% PE multiple premium to its peers is justified given the company's long-term organic earnings power, prospect of additional future growth by acquisition, debt free balance sheet and disciplined management team," he wrote.