Home Health Care Stocks Finish 2017 Strong
Home health care stocks posted double-digit growth in 2017, though they dipped slightly in the last month of the year.
The Home Health Index, which tracks market values of three of the largest publicly traded home health care companies in the U.S.—Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED) and LHC Group (Nasdaq: LHCG) —rose 18.68%, year-over-year, between December 2016 and 2017. Still the index shed 5.82% in December compared to the previous month, and was bested by the S&P 500 Index, which rose 1.36% in December.
“This was another strong year for home health care investors and providers,” said Stoneridge President Rich Tinsley. “2018 will bring many new challenges and opportunities in the industry, especially as home health care giants Almost Family and LHC Group execute on their planned merger.”
The deal between LHC Group and Almost Family is expected to close in the first quarter of 2018 and results in a company with a combined revenue of $1.8 billion. The implied transaction value is roughly $2.4 billion, according to LHC Group.
The combined organization would trade on the NASDAQ exchange under the symbol “LHCG,” and will operate out of Lafayette, Louisiana, where LHC is currently based. When completed, the organization is projected to have 781 locations total in 36 states and more than 31,000 employees. The merger will also prompt the addition of Kindred Healthcare (NYSE: KND) to the Stoneridge Home Health Index.
Despite the buzz surrounding the merger, Lafayette, Louisiana-based LHC Group’s stock dropped 7.38% in December. Year to date, LHC Group’s share prices rose 23.14%, which clocked in as the largest yearly gain on the HHI.
Louisville, Kentucky-based Almost Family also stumbled in its December stock performance. The company’s share prices fell 7.32%, erasing some of the increases it saw this year. Still, the provider came out on top: Almost Family’s stocks gained 16.65% in 2017.
Amedisys, on the other hand, fared best in December. The Baton Rouge, Louisiana-based company’s stock value fell just 2.45% in the month. Year to date, its share prices rose 15.92%, according to the Index.
Share prices for Addus HomeCare (Nasdaq: ADUS), which is not included in the index because so little of its income comes from Medicare, bucked the trend and gained 4.31% in December. For the entire year, Addus’s stock price rose 2.65%.
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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 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 January 2018 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||12/31/17||1 mos change||YTD change||12/31/16||12/31/15|
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)||12/31/17||12/31/16||12/31/15|
|HH Index Total||3888||3015||2668|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||120%||103%||103%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||16.38||14.26||12.86|
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 January 2018 | Stoneridge Partners)
Recent Transactions From Around The Country
- New Directions Behavioral Health, headquarted in Kansas City, Missouri acquired E4 Health of Irving, Texas.
- Stratum Health System, the Sarasota company that owns Tidwell Hospice, has acquired a Naples-based home health care company, Avidity Home Health.
- Nurses Unlimited, a personal care services, home health and private duty nursing company was acquired by Texas Home Health, an AccentCare, Inc. company.
- Noor Inc., based in New York City, acquired San Antonio, Texas-based home health care provider Restorative Health Care.
- Humana announced it will acquire 40% stake in Kindred Healthcare’s home care business.
- provider in the U.S., acquired A Place to Call Home, an Arizona based company providing foster care, respite, host home and related supports to children and individuals with intellectual and developmental disabilities.
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Home Health Index January 2018 | Stoneridge Partners