Here's Why You Should Add Amedisys (AMED) to Your Portfolio
Amedisys, Inc. AMED has been gaining investor confidence on consistently positive results. Over the past three months, the company has outperformed its industry. The stock has gained 11.4% compared with the industry’s 8.7%. Also, the company has outperformed the S&P 500’s 2.9% gain.
This renowned home health and hospice services provider has a market cap of $1.85 billion. The company’s five-year projected growth rate is favorable at 19.5% compared with the industry’s 13.4%.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.
The company’s estimate revision trend for the current year has been positive. In the past 60 days, eight analysts revised their estimates upward with no movement in the opposite direction. Resultantly, earnings estimates increased around 19.4% to $3.01 per share.
Per our Style Score, Amedisys sports a Growth Score of B which is reflective of the company’s strong prospects. Our research shows that stocks with a Growth Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Additionally, the company exhibits a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum. Per our research, VGM Score is simply a weighted combination of these parameters and is a comprehensive tool that allows investors to filter through the standard scoring system and pick the winning stocks.
In this regard, Amedisys has a favorable annualized projected earnings growth rate of 36.3% compared with the industry’s 23.3%. The company’s sales to assets ratio of 1.93 versus the industry’s 1.04 signifies that it is a solid growth pick.
Let’s find out whether the recent positive trend is a sustainable one.
Looking at Amedisys’ solid fourth-quarter 2017 results in terms of both earnings and revenues, we are encouraged by the company’s long-term strategy to evolve from a traditional home health and hospice care company to one that is focused on bringing home a continuum of care. This is because Amedisys intends to better serve patients and diversify sources of payment so as to become less reliant on Medicare. In this regard, the company witnessed encouraging growth in Medicare and non-Medicare revenues at the Home Health and Hospice divisions in fourth-quarter 2017.
We are upbeat about Amedisys’ strategic acquisitions over the past year. In this regard, the latest buyout has been that of Intercity Home Care, a personal care provider headquartered in Malden, MA. With this, the renowned home health and hospice services provider has a wider presence in Massachusetts.
We also note that, the home health industry is poised to grow significantly in the near term driven by the positive demographic trend in the United States. Meanwhile, Amedisys should continue to benefit from the aging demographics of the U.S. population and home health as a cheaper care modality. In addition, with continued pressure on the U.S. healthcare system, we believe operators such as Amedisys will continue to benefit from increased volume shift from higher-cost institutional settings to a lower-cost environment such as home health.
We are also optimistic about the recently passed Bipartisan Budget Act of 2018 by the Congress, which reduces the company’s 2018 reimbursement impact from 1.4% to 0.7%.
Furthermore, the company’s strong cash balance position bolsters investors’ confidence in the stock.
On the flip side, escalating operating expenses continue to pose threat. Also, an intensely competitive landscape and regulatory concerns are major bottlenecks for the home health and hospice industry.
Other Key Picks
Other top-ranked stocks in the broader medical sector are PerkinElmer PKI, Bio-Rad Laboratories BIO and athenahealth, Inc. ATHN.
Bio-Rad Laboratories sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.
athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.
PerkinElmer has a long-term expected earnings growth rate of 12.3%. The stock carries a Zacks Rank #2.
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