Home Health Care Stocks Plummet in July

Home Health Index August 2017 | Stoneridge Partners: After six months largely marked by market gains, home health care companies saw their share values sharply drop in July, according to the latest figures from the Home Health Index by Stoneridge Partners. The index, which tracks the market values of three of the largest publicly traded home health care companies—Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG)—dropped 19.57% in July compared to the previous month. The decline was in stark contrast to the S&P 500, which climbed 1.93% in July from June.

The stock market reaction among home health companies was influenced by a significant proposal issued during the month that is expected to have wide-ranging consequences for the sector. Compared to the first half of 2017, home health care stocks were on a hot streak, vastly outpacing the S&P 500.

“Investors in July reacted to the proposed Home Health Groupings Model (HHGM) from the Centers for Medicare & Medicaid Services (CMS),” said Stoneridge President Rich Tinsley. “The proposed rule would overhaul reimbursement payment to Medicare-certified home health care providers and has the potential to cut nearly $1 billion in payments to the industry. The drastic cuts sent investors scurrying from public companies in the sector.”

Amedisys, based in Baton Rouge, Louisiana, saw its share price drop the most amongst its peers during July, with a decline of 24.60%. Year to date, the stock is still up 11.10%, according to the Index. Amedisys CEO Paul Kusserow recently stated in the company’s second quarter 2017 earnings call that while the proposed rule is worrisome, there is still a process to undergo before the rule will be implemented.

Louisville-based Almost Family’s stock also took a big hit in July, dropping 19.79% from June. Almost Family has still seen gains throughout the year, and its share price remains up 12.13% year to date, despite monthly losses.

LHC Group fared the best of its peers in July, though also experienced a significant drop in its share value. The Lafayette, Louisiana-based company’s share price declined 14.71%. Year to date, LHC Group’s stock has risen 26.70%. Despite the proposed rule, the company is moving forward with acquisition and joint venture deals, CEO and chairman Keith G. Myers announced during the company’s most recent quarterly earnings report.

Addus HomeCare (Nasdaq: ADUS), which is not included in the index because so little of its income comes from Medicare, also felt the sting of the proposal, with its share price dropping 8.74%. Addus, which is based in Frisco, Texas, and is known as a personal care services provider, has maintained steady gains throughout the year; its stock is up 10.34% year to date.

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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 for over 14 years, 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 over the past 24 months.

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

(Home Health Index August 2017 | Stoneridge Partners)

 

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

Company 7/31/17 1 mos change YTD change 7/31/16 7/31/15
Almost Family 49.45 -19.79% +12.13% 40.30 43.76
Amedisys 47.36 -24.60% +11.10% 54.49 43.63
LHC Group 57.90 -14.71% +26.70% 45.39 40.27
HH Index* 51.57 -19.57% +16.82% 46.73 42.55
S&P 500 2470.30 +1.93% +10.34% 2173.60 2103.84
Addus 33.95 -8.74% -3.14% 18.45 27.14

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) 7/31/17 7/31/16
Almost Family 837 540
Amedisys 1556 1890
LHC Group 1137 911
HH Index Total 3530 3341
Addus 399 232


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

Company 7/31/17 7/31/16
Almost Family 125% 97%
Amedisys 105% 144%
LHC Group 121% 110%
HH Index Average* 117% 117%
Addus 97% 67%


Multiples of EV/EBITDA

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

Company 7/31/17 7/31/16
Almost Family 21.30 12.63
Amedisys 18.31 23.64
LHC Group 13.35 11.08
HH Index Average* 17.65 15.78
Addus 12.75 9.68

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 August 2017 | Stoneridge Partners)

Recent Transactions From Around The Country

  • Boyne Capital Partners announced the acquisition of AmeriBest Home Care, Inc., a home care provider serving seniors and disabled residents in Pennsylvania.
  • ncgCare, a Richmond-based behavioral healthcare provider, has acquired Appalachian Community Services in North Carolina, a provider of mental health, substance abuse and ID/DD services.
  • Encompass Home Health and Hospice entered the state of Illinois with the acquisition of VNA Healthtrends.
  • Crossroads Treatment Centers has completed its acquisition of Center of HOPE, an opioid treatment program in Myrtle Beach, South Carolina.
  • JourneyPure, a Nashville, Tennessee-based addiction treatment provider has acquired The Center for Professional Excellence, a local provider of addiction and mental health services.
  • BayMark Health Services, Texas-based opioid treatment provider has acquired Valley Alliance Treatment Services, an opioid treatment center in Morgantown, West Virginia.
  • Berks Community Health Center announced they have signed an LOI to acquire All About Children Pediatric Partners in Reading, Pennsylvania.
  • MedEquities Realty Trust announced they have signed a definitive agreement with AAC Holdings to acquire four behavioral health and substance abuse treatment facilities in Las Vegas and Dallas.

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Another Cartoon Favorite from the New Yorker

 

Home Health Index August 2017 | Stoneridge Partners

 

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Home Health Index August 2017 | 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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