Home Health Stocks Rebound as Home Health Index Narrows to Two Comapnies

Home Health Stocks Rebound as HHI Narrows To Two Companies

Home health stock prices rebounded in April after a short-lived decline in values in March.

The bounce-back came on the heels of major changes in the sector at the beginning of 2018, including the completion of a mega-merger that will change the scope of the Home Health Index (HHI) created by Stoneridge Partners moving forward.

The HHI, which has long tracked the market values of Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG), has narrowed to two companies following the merger of AFAM and LHCG at the start of April 2018. Almost Family will no longer be included in the HHI because it is no longer traded as an individual stock.

The mega-merger makes LHC Group the second-largest home health care company in the nation, with 775 locations in 36 states and combined annual revenue of nearly $2 billion. The merger also had a profound impact on the company’s stock price, which jumped 20.9% in April from the previous month. Year to date, the stock is up 21.5%.

Despite having closed this enormous transaction, LHC Group seemingly isn’t slowing down on its mergers and acquisitions activity. The company has an active pipeline of 24 ongoing discussions with health systems and hospitals to form home health joint ventures, CEO Keith Myers stated during the company’s recent first quarter earnings call.

Also in April, Amedisys’s (NASDAQ: AMED) stock price rose 9.3%. Amedisys is based in Baton Rouge, Louisiana. During Q1 2018, Amedisys saw its margins swell to their highest levels since 2015, according to quarterly earnings results published in early May. Year to date, the stock is up 25.2%.

Removing Almost Family from the HHI led to significant change in the index. At the end of April, the HHI was up 18.4%, with the recalculation of the index playing a role in the uptick. By comparison, the HHI declined 2.7% in March. Year to date, the index is up 24.4%. Home health stocks weren’t the only ones to rebound from a tough March; the S&P 500 slightly recovered, rising 0.90%.

Share value gains may have been partly buoyed by the announcement that non-skilled in-home care supports will be allowed as a supplemental benefit for Medicare Advantage plans in 2019, the Centers for Medicare & Medicaid Services said in a proposal at the beginning of April. Medicare Advantage is a growing opportunity for the large home health care providers.

“On top of the completion of a major transaction that changed the face of the home health care industry, the news from CMS definitely helped companies overcome a turbulent March,” said Stoneridge Partners President Rich Tinsley. “And with strong first quarter earnings, the coming months may be even better for home health companies.”

Elsewhere in the industry, Frisco,Texas-based Addus HomeCare (Nasdaq: ADUS) continues its positive stock streak. As April ended, Addus’ stock price rose 7.19%. Year-to-date, Addus stock is up 49.86%. Even though Addus is a major personal care services provider, it’s not part of the HHI because little of its revenue comes from Medicare.

Quote Of The Month 

Gone are the days of visiting hours and restricted call times; home health care means friends and family can visit whenever they want. “Receiving care at home allows patients to stay in their own environment within close range to loved ones.  We know this can have a positive impact on mental well being.” – Rebecca Bell, General Manager – Member Health at Medibank

Read the Full Article Here: Five Benefits of Home Health Care

See It To Believe It!

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

  • 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 May 2018 | Stoneridge Partners)

 

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

Company 4/30/18 1 mos change YTD change 4/30/17 4/30/16
Amedisys 65.97 +9.33% +25.16% 57.63 51.49
LHC Group 74.45 +20.94% +21.55% 55.43 40.34
HH Index* 70.21 +18.40% +24.40% 54.24 44.61
S&P 500 2654.8 -.90% -.70% 2388.13 2065.3
Addus 52.15 +7.19% +49.86% 34.6 18.5

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) 4/30/18 4/30/17 4/30/16
Amedisys 2260 1950 1780
LHC Group 1440 1010 756
HH Index Total 3700 3739 3025
Addus 607 409 192


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

Company 4/30/18 4/30/17 4/30/16
Amedisys 150% 137% 145%
LHC Group 136% 122% 98%
HH Index Average* 143% 128% 113%
Addus 145% 102% 57%


Multiples of EV/EBITDA

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

Company 4/30/18 4/30/17 4/30/16
Amedisys 17.59 23.92 19.95
LHC Group 16.08 13.06 9.75
HH Index Average* 16.84 18.92 14.34
Addus 18.44 13.1 8.02

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 May 2018 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Amedisys enlarged its personal care footprint with its subsidiary Associated Home Care’s close of the acquisition of East Tennessee Personal Care Services based in Knoxville, Tennessee.
  • Delphi Behavioral Health Group has merged with Summit Behavioral Health in a deal that brings with it facilities in New Jersey, Massachusetts and Pennsylvania—three new markets for Delphi.
  • National Home Health Care of Cromwell merged with Great Lakes Caring of Jackson and Jordan Health Services of Dallas.

SOLD!!! by Stoneridge

  • Stoneridge Partners, Partner Ben Bogan and Associate Partner Charles Jantzi, provided sell side M&A advisory services in the Addus Homecare & Ambercare transaction with revenue of approximately $57,000,000.

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

May-HHI

     

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Home Health Index May 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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NEWS RELEASE
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Yahoo Finance

Transaction Elevates Addus to the Leading Provider of Both Personal Care and Hospices Services in the State of New Mexico

FRISCO, Texas, May 1, 2018 /PRNewswire/ — Addus HomeCare Corporation (NASDAQ: ADUS), a provider of comprehensive home care services, today announced that it has completed the purchase of 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 funded the purchase price of $40.0 million (net of excess cash) through the delayed draw term loan portion of its credit facility.

Dirk Allison, President and Chief Executive Officer of Addus, commented, “We welcome the team from Ambercare, a long-time provider of high quality home care services, to Addus.  We are pleased to complete this transaction, which is consistent with the central elements of our acquisition strategy. It builds on our already strong presence in New Mexicoto give us market leading positions; it expands our scope of home care services in the market; and it is expected to be immediately accretive to our earnings. We are particularly excited to supplement our service offering with hospice services through this acquisition. Our management team has deep experience in the hospice industry, and we intend to continue to grow this segment of the business.

This transaction is the second large acquisition we have completed in the past 30 days. These deals 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, Ben Bogan and Charles Jantzi, provided sell side M&A advisory services in the Addus Homecare & Ambercare transaction.

Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by words such as “will,” “continue,” “expect,” “believe” and similar expressions. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, including discretionary determinations by government officials, the consummation and integration of acquisitions, anticipated transition to managed care providers, our ability to successfully execute our growth strategy, unexpected increases in SG&A and other expenses, expected benefits and unexpected costs of acquisitions and dispositions, the possibility that expected benefits may not materialize as expected, the failure of the business to perform as expected, changes in reimbursement, changes in government regulations, changes in Addus HomeCare’s relationships with referral sources, increased competition for Addus HomeCare’s services, changes in the interpretation of government regulations, the uncertainty regarding the outcome of discussions with managed care organizations, changes in tax rates, the impact of adverse weather, higher than anticipated costs, lower than anticipated cost savings, estimation inaccuracies in future revenues, margins, earnings and growth, whether any anticipated receipt of payments will materialize and other risks set forth in the Risk Factors section in Addus HomeCare’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2017, which is available at www.sec.gov. Addus HomeCare undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this press release do not purport to be predictions of future events or circumstances and may not be realized.

 About Addus
Addus is a provider of comprehensive home care services that include, primarily, personal care services that assist with activities of daily living, as well as hospice and home health services. Addus’ consumers are primarily persons who, without these services, are at risk of hospitalization or institutionalization, such as the elderly, chronically ill and disabled. Addus’ payor clients include federal, state and local governmental agencies, managed care organizations, commercial insurers and private individuals. Addus currently provides home care services to approximately 39,000 consumers through 156 locations across 25 states. For more information, please visit www.addus.com.

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