Home Health Care Stocks Weather Turbulent Market in February

Home Health Stocks Weather Turbulent Market in February

 Home health stocks successfully withstood highly volatile late-January and early-February markets to rebound by month’s end. In fact, the home health index, which tracks the monthly market values of three of the biggest home health care companies—Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—increased 4.86%  last month. Home health stocks fared far better than the S&P 500, which actually declined 3.77% in February.

 February was marked by a two-year budget deal that contained many health care provisions impacting the home health care industry. The deal was signed into law Feb. 9. The budget included provisions for a new payment model for home health by 2020 that was budget neutral, unlike the previous home health groupings (HHGM) model. The HHGM model, as it was originally proposed in 2017, would have potentially cut up to $950 million from in payments to the industry.

 “The home health care sector was buoyed by overall good news within the Bipartisan Budget Act of 2018,” said Stoneridge Partners President Rich Tinsley. “The new payment reform revisions position the home health industry for a strong 2018. Despite significant regulatory changes, the market rewarded the sector’s increased stability in February.”

 Baton Rouge, Louisiana-based Amedisys saw the largest gains in February. Stocks rose 11.97%. Year-to-date, Amedisys stock prices are up 12.33%.

Almost Family, based in Louisville, Kentucky, posted the second-largest gains last month, as stock prices increased 2.34%. Finally, LHC Group saw stocks rise 1.23%. The merger between Almost Family and LHC Group is back on track after hitting a road bump last month. The planned merger is now expected to close in the summer of 2018.

However, not all home health companies had good news to celebrate when February came to a close. Addus Homecare Corporation (Nasdaq: ADUS), which is not part of the HHI because very little of the company’s income comes Medicare, saw stocks fall 6.15%. Year-to-date, Addus stock is down 1.29%.   Also in February,  Addus HomeCare Corporation (NASDAQ: ADUS), a provider of comprehensive home care services, had positive news to announce with the signing of a definitive agreement to purchase Ambercare Corporation, Inc., a provider of personal care, hospice and home health services, headquartered in Albuquerque, New Mexico.

Quote Of The Month 

“Home care can relieve pressure on hospitals where many patients are occupying hospital beds when they could and should be in the comfort of their own homes. Families go in desperation to the emergency room when they, as caregivers, have burned out and don’t know where else to turn. Hospitals run out of beds but can’t discharge a patient without knowing the person has a safety net.” said Sue VanderBent, CEO of Home Care Ontario.

Read the Full Article Here: Home Care could be answer to hospital overcrowding

See It To Believe It!

The Stoneridge Partners Home Health Index (HH Index) is updated monthly and measures the performance of these three publicly traded home health companies, all listed on the NASDAQ:

  • Almost Family (AFAM)
  • LHC Group (LHCG)
  • Amedisys (AMED)

This graph compares the percentage of the Home Health Index to the percentage change in the S&P 500 Index going back to 2002.
[visualizer id=”8359″]
This is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart.
[visualizer id=”8361″]

This graph displays HH Index performance since 2002.

[visualizer id=”8363″]
This graph compares the HH Index to the price of Addus stock (non-Medicare).
[visualizer id=”8362″]

(Home Health Index March 2018 | Stoneridge Partners)

 

Here are the results of the stock prices for the past two years:

Company 2/28/18 1 mos change YTD change 2/28/17 2/28/16
Almost Family 58.95 +2.34% +6.50% 49.85 38.58
Amedisys 59.21 +11.97% +12.33% 51.2 38.2
LHC Group 64.38 +1.23% +5.11% 48.52 36.84
HH Index* 60.85 +4.86% +7.81% 49.86 37.87
S&P 500 2718.5 -3.77% +1.68% 2396.96 1948.05
Addus 34.35 -6.15% -1.29% 33.7 23.41

Although we track the performance of Addus, they are not included in our HH Index because very little of their revenue comes from Medicare.

 

Enterprise Value (EV)

EV (in M) 2/28/18 2/28/17 2/28/16
Almost Family 948 645 456
Amedisys 2020 1700 1330
LHC Group 1310 949 693
HH Index Total 4278 3294 2480
Addus 410 352 246


Enterprise Value (EV), aka Selling Price, as Percent of Revenue

Company 2/28/18 2/28/17 2/28/16
Almost Family 119% 105% 89%
Amedisys 134% 123% 108%
LHC Group 131% 108% 90%
HH Index Average* 128& 112% 96%
Addus 99% 92% 74%


Multiples of EV/EBITDA

Think of this as selling price as a multiple of EBITDA.

Company 2/28/18 2/28/17 2/28/16
Almost Family 26.99 13.87 12.44
Amedisys 16.08 21.47 14.92
LHC Group 13.99 11.52 8.94
HH Index Average* 19.02 15.62 12.10
Addus 12.02 13.28 10.28

The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ. Enterprise value is defined as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EBITDA is calculated using methodology which may differ from that used by a company it’s reporting. (Home Health Index March 2018 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Nova Leap Health Corp, based in Halifax, Nova Scotia, an international provider of personal home care and support services acquired Family Tree Home Care, based in Central Massachusetts.
  • Traditions Healthcare Holding Company, LLC, a portfolio company of Dorilton Capital Advisors, LLC acquired ProCare Hospice Corp., based in Oxnard, California.

Signed Deal by Stoneridge

  • Addus HomeCare increases presence in New Mexico with agreement to purchase Ambercare Corporation.  Sell side advisory services during the acquisition was provided by Partner Ben Bogan and Associate Partner Charles Jantzi. See article here: Addus HomeCare increases presence in New Mexico

Exclusively Listed For Sale By Stoneridge Partners

Do you know of any acquisitions that have taken place?  We are interested in your comments.  At the top of this column is a “Contact Tab” with a section for comments.  These can be sent anonymously and the return email address can be left blank.

Another Cartoon Favorite from the New Yorker

     

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Home Health Index March 2018 | Stoneridge Partners

From Rich Tinsley, Publisher of “Home Health Index”. Rich can be reached at [email protected] or (239) 561-0826 and toll-free 800-218-3944

Previous editions of this monthly newsletter can be searched for at the bottom of the home page of the Home Health Index. Links to Google Finance: Almost Family | Amedisys | LHC Group

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Sell side advisory services during the acquisition was provided by Stoneridge Partners, Partner Ben Bogan and Associate Partner Charles Jantzi.


NEWS RELEASE
NEWS PROVIDED BY

Addus HomeCare, Inc. 

Business Provides Personal Care, Hospice and Home Health Services through 15 Locations across New Mexico, Producing Revenue of Approximately $57 Million

FRISCO, Texas, Feb. 28, 2018 /PRNewswire/ — Addus HomeCare Corporation (NASDAQ: ADUS), a provider of comprehensive home care services, today announced the signing of a definitive agreement to purchase Ambercare Corporation, Inc., a provider of personal care, hospice and home health services, headquartered in Albuquerque, New Mexico.  Ambercare currently serves approximately 2,600 consumers through 15 locations located across New Mexico and for 2017, generated revenue of approximately $57 million. Addus expects to complete the transaction in the second quarter of 2018 for a purchase price of $40.0 million (net of excess cash), subject to usual closing conditions, with funding through the delayed draw term loan portion of its credit facility.

Dirk Allison, President and Chief Executive Officer of Addus, commented, “We are pleased to announce our agreement to purchase Ambercare, a long-time provider of high quality home care services and the leading hospice provider in the state. With a trailing EBITDA purchase multiple between 7.0x and 8.0x, we expect this transaction to be accretive to our 2018 financial results, as well as significantly expand the scope of services we provide in New Mexico. The completion of this acquisition, along with our August 2017 purchase of Options Home Care, will make Addus New Mexico’s leading provider of both personal care and hospice.

“We are particularly excited to supplement our service offering with hospice services through this acquisition, consistent with our strategy of providing an expanded range of home-based healthcare services.  Our management team has deep experience in the hospice industry, and we look forward to welcoming the employees of Ambercare to the Addus family and adding their expertise to our own, as we intend to continue to grow this segment of the business in the future.”

Mary Merrell, Chairwoman of Ambercare, said, “Given the strong reputation of Addus in our market and nationally, they are a natural fit for Ambercare’s customers and staff.  We are excited to be joining Addus, and we expect their support systems and expertise will help us remain a leader in hospice, home health and personal care services in our community.”

Mr. Allison added, “This acquisition complements our acquisitions in October and January of two high quality home care providers of services to private pay consumers.  These transactions reflect our growing acquisition pipeline, which we expect will continue to help us expand our market share and diversify our client base in targeted markets.  With a strong financial position and substantial cash flow from operations, we believe we are well-positioned both to fund our organic growth and execute additional accretive acquisitions during 2018.”

Stoneridge Partners LLC provided exclusive merger and acquisition advisory services to the Seller, Ambercare Corporation, Inc.  Stoneridge Partners LLC Partner, Ben Bogan and Associate Partner, Charles Jantzi led the deal team for this transaction.  Stoneridge Partners LLC is the leading merger and acquisition advisory firm in home care, hospice and behavioral health.  Phone: (800) 218-3944 .

Related Links
Website
SOURCE Addus HomeCare, Inc.
http://www.addus.com

 

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