Home Health Stocks Falter as Economic Uncertainties Linger

Home Health Stocks Falter as Economic Uncertainties Linger

After surviving market turbulence in January and February 2018, home health share prices failed to experience the same buffer in March. The Home Health Index by Stoneridge Partners, which tracks the market value of the three largest public home health companies — Almost Family (NASDAQ: AFAM), LHC Group (NASDAQ: LHCG) and Amedisys (NASDAQ: AMED) — fell 2.67% last month, roughly tracking the overall stock market. By comparison, the S&P declined 3.10% in March.

The good news: not every company in the HHI experienced stock price declines. Year to date, the HHI is up 5.07%. Amedisys, based in Baton Rouge, Louisiana, saw its stocks climb 2.14%. The increase may be a positive response to news in March that Amedisys received an average Quality of Patient Care Star Rating of 4.22 (out of a possible 5 stars total) from the Centers for Medicare & Medicaid Services. That rating is approximately 30% higher than the industry average.

Louisville Kentucky-based Almost Family’s stock fell 5.12%, while Lafayette, Louisiana-based LHC Group experienced a drop of 4.43% during March. On March 29, Almost Family and LHC Group completed their long-discussed merger. The all-stock merger created the second-largest home health provider in the country with an annual revenue of nearly $1.8 billion. Kindred Healthcare (NYSE: KND) remains the largest home health company in the industry, though its home health and hospice business is also undergoing an acquisition by Humana (NYSE: HUM).

However, home health companies may fare better following an April 2 announcement from CMS that non-skilled in-home care supports will be allowed as a supplemental benefit for Medicare Advantage plans in 2019.

“Home health providers surely welcome this change, and this announcement puts companies in a strong position for April and the remainder of 2018,” said Stoneridge Partners President Rich Tinsley. “That’s good news after a rocky March that saw declines in the HHI and S&P 500, as investors reacted to fears over major economic uncertainties, including a potential trade war with China and other countries rattled markets.”

Also of note in the home health industry, Frisco, Texas-based Addus HomeCare (NASDAQ: ADUS) stock prices rose 39% after it announced it achieved a new record for net service revenue during Q4 2017. Addus, a major personal care services provider, is not part of the HHI because little of the company’s revenue comes from Medicare.

Quote Of The Month 

“It’s easier for seniors to plan their own funerals than to budget and plan for assisted living.  I think the thought that they might not be able to care for themselves is frightening.  You know that death is going to happen. But you don’t know what you’re going to go through on the way there.” – Karen Hanson, the community service manager for Home Instead Senior Care.

Read the Full Article Here: Senior care planning should begin early

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.
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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).
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(Home Health Index April 2018 | Stoneridge Partners)

 

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

Company 3/31/18 1 mos change YTD change 3/31/17 3/31/16
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) 3/31/18 3/31/17 3/31/16
Almost Family 879 750 444
Amedisys 2090 1790 1670
LHC Group 1280 1050 670
HH Index Total 4249 3590 2784
Addus 500 391 180


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

Company 3/31/18 3/31/17 3/31/16
Almost Family 110% 120% 87%
Amedisys 138% 126% 136%
LHC Group 120% 117% 87%
HH Index Average* 123% 121% 103%
Addus 120% 98% 54%


Multiples of EV/EBITDA

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

Company 3/31/18 3/31/17 3/31/16
Almost Family 25.02 19.05 12.09
Amedisys 16.29 21.96 18.76
LHC Group 14.27 12.51 8.64
HH Index Average* 18.53 17.84 13.16
Addus 15.21 12.54 7.52

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 April 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 the business assets of Home Health Solutions, Inc. located in Holyoke, Massachusetts.
  • LHC Group, a Louisiana-based home health care provider has become the second-largest in the United States with the completion of its acquisition of Almost Family, a Kentucky-based firm.

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 April 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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