Let me get straight to it. VitalHub (TSX:VHI) is one of the most compelling small-cap Canadian tech stocks you can buy right now.
The company just crossed $100 million in annual revenue, carries no debt, sits on nearly $120 million in cash, and is rolling out artificial intelligence products that its own customers are already paying to build.
Here is the full picture.
Source: Getty Images
Is the Canadian stock a good buy?
Valued at $500 million by market cap, VitalHub builds software for hospitals, mental health providers, social services agencies, and other healthcare organizations. Its tools help manage patient flow, electronic health records, referral management, and workforce scheduling.
- The company serves more than 1,000 clients across Canada, the United Kingdom, Australia, and other markets.
- Crossing the $100 million revenue milestone in 2025 was a big deal for the company. But what matters even more than the top line is the quality of that revenue.
- According to VitalHub’s fourth-quarter (Q4) earnings call, it ended 2025 with annual recurring revenue of $96.1 million. That represents 10% net organic growth over the prior year.
- Recurring revenue accounted for 75% of total revenue in Q4. A widening recurring revenue base should help the company generate stable cash flow across business cycles.
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margins came in at 24% for the quarter, up from 22% in the prior quarter. Management is targeting a return to 27%-28% margins as cost synergies from recent acquisitions continue to flow through the business.
- VitalHub closed 2025 with $119.2 million in cash and zero debt. For a company of its size, that balance sheet is exceptional. It gives management the flexibility to target acquisitions without taking on high-cost debt, and according to CEO Dan Matlow, the merger and acquisition pipeline is active.
Matlow noted on the earnings call that private equity buyers are pulling back from some deals, leaving targets available at more reasonable valuations.
VitalHub has a disciplined acquisition approach and is primarily looking at opportunities in the United Kingdom and Europe, where it already has a strong foothold.
The Novari and Induction acquisitions completed in recent quarters are already integrating well. Cross-selling between Novari and MedCurrent is picking up, particularly in the United Kingdom market.
A widening AI moat
VitalHub has established dedicated AI development teams and is building AI features directly into its existing products. More importantly, some of those features are already generating early revenue. Matlow confirmed that customers have already paid the company to help build AI-powered transcription tools.
Novari shipped its first AI module for imaging protocoling, a feature customers bought before it was even built. A voice-enabled analytics feature for the SHREWD product line is also in development with partner customers.
Matlow expects AI-driven revenue contributions to begin appearing in the financial statements from mid-2026 onward.
The company is also using AI internally to improve sales processes, customer support, and software development productivity.
The Foolish takeaway
VitalHub does not generate the same headlines as some of the bigger Canadian tech players. But the fundamentals here are quietly exceptional: a clean balance sheet, sticky recurring revenue, improving margins, a growing pipeline of acquisitions, and AI products that customers are already paying for.
Analysts tracking the small-cap TSX stock forecast free cash flow (FCF) to expand to $56.66 million in 2030. If VHI stock is priced at 20 times forward FCF, it could more than double over the next four years.
The company is also targeting a return to Rule of 40 status, meaning combined revenue growth and EBITDA margin above 40%. For investors seeking a smaller Canadian tech stock with real upside and limited downside risk, VitalHub deserves a closer look.
