Home Health Care Stocks Trend Up to Start 2018, Look to Weather Early Year Volatility
Home Health Stocks Trend Up to Start 2018, Look To Weather Early Year Volatility
Home health stocks rose across the board in January, signaling a strong start to the new year, though stock increases were still short of S&P 500 gains during the month.
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 2.82% in January compared to the previous month. By comparison, the S&P 500 increased 5.67% in January. The Index ended 2017 up 18.68% year over year.
Almost Family, based in Louisville, Kentucky, saw the biggest gains for the month, with its share price increasing 4.07%. Lafayette, Louisiana-based LHC Group stock prices experienced gains of 3.84%. Baton Rouge, Louisiana-based Amedisys Inc. values also rose, but only saw a slight increase of 0.32%.
“As the new tax bill expectations set in, we saw index companies gain. Even with the late-month market volatility, stocks were in line with expectations, and we’ll continue to monitor how tax reform will affect future stock prices,” said Stoneridge President Rich Tinsley.
During the month, the planned merger of two of the companies tracked by the Index—LHC Group and Almost Family—hit a road bump, as LHC Group refiled its paperwork with the Securities and Exchange Commission (SEC), effectively restarting the clock for the regulatory approval process. The merger, which is expected to close in the summer of 2018, was announced in November 2017 and is estimated to have a transaction value of $1.8 billion.
While share prices were up overall across the home health industry for the month, volatility struck the stock market at the end of January, intensifying into wild market swings in early February.
Additionally, Addus Homecare (Nasdaq: ADUS) stock prices increased 5.17%. However, because very little of the company’s income comes from Medicare, it isn’t included in the index.
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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.
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.
This graph displays HH Index performance since 2002.
This graph compares the HH Index to the price of Addus stock (non-Medicare).
(Home Health Index February 2018 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||1/31/18||1 mos change||YTD change||1/31/17||1/31/16|
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)||1/31/18||1/31/17||1/31/16|
|HH Index Total||4017||3217||2416|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||124%||110%||94%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||16.88||15.23||11.85|
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 February 2018 | Stoneridge Partners)
Recent Transactions From Around The Country
- Recover Health Inc., a Minnesota-based company has acquired State Home Care Services, an in-home health care company in Sioux Falls and other areas across South Dakota.
- Greenville based InvestSouth acquired Interim HealthCare of Greenville.
- Bridgestone Living LLC, the assisted and independent living portfolio of the Ensign Group acquired Cedar Hills Senior Living in Cedar Hill, Texas and Deer Creek Senior Living in DeSoto, Texas
- Pennsylvania Hospice Holdings acquired Taylor Hospice of Ridley Park, Pennsylvania.
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- Care Advantage, a leading provider of home healthcare services in the Mid-Atlantic and a BelHealth Investment Partners (“BelHealth”) portfolio company, acquired Ready Hands, Inc. of Alexandria, Virginia. Partner, Ben Bogan and Associate Partner, Charles Jantzi, provided sell-side advisory services for this transaction.
- Stoneridge represented a Medicaid waiver home health company in Texas in a transition that closed in January, 2018. Partner, Ben Bogan and Associate Partner, Charles Jantzi, provided sell-side advisory services for this transaction.
- Broadgate Capital acquired Abbi Home Care, Inc. of Benbrook, Texas in January 2018. Partner, Joe Lynch, provided sell-side advisory services for this transaction.
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Home Health Index February 2018 | Stoneridge Partners