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.
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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.
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This graph compares the HH Index to the price of Addus stock (non-Medicare).
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(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
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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
