Healthcare Services Group (HCSG): Zacks Rank Buy
Healthcare Services Group Inc. (HCSG) has paid a cash dividend for 38 consecutive quarters, including an uninterrupted dividend increase over the last 37 quarters. Currently, this business service provider for the healthcare industry has a dividend yield of 2.7%. Earnings for this Zacks Rank #2 (Buy) are expected to grow 15.7% in 2012 and 24.1% in 2013.
Dividend Payout
Healthcare Services Group paid a cash dividend of 16.5 cents per share in the third quarter of 2012, representing a 3.1% increase from the payout in the year-ago quarter. The company has paid consecutive cash dividends for the last 38 quarters since 2003, and has even enhanced it in each quarter except for one. The current dividend payment affirms a yield of 2.7%.
Strong Third Quarter
Healthcare Services Group reported strong third quarter results on October 9, with a 24.6% year-over-year advance in revenues to $272.7 million. The healthy top-line growth was attributable to a solid operating platform backed by an experienced management team, as the company leveraged its resources and national network to serve local, regional and national clients.
Net income in the reported quarter increased 15% year over year to $11.5 million. On a per share basis, earnings stood at 17 cents, which exceeded the year-ago tally by 13.3% and was in line with the Zacks Consensus Estimate.
The Zacks Consensus Estimate for 2012 is currently pegged at 65 cents, implying year-over-year growth of 15.7%. For 2013, the Zacks Consensus Estimate of 80 cents represents a year-over-year increase of 24.1%.
Premium Valuation
The company's valuation metrics are at a premium on a price-to-earnings (P/E) and price-to-book (P/B) basis. Shares of Healthcare Services Group are currently trading at a forward P/E of 30.22x versus the peer group average of 24.40x. On a P/B basis, shares are trading at 7.28x versus 2.86x for the peer group average. A healthy earnings growth prospect warrants the premium valuation of the company.
Since June 29, 2012, Healthcare Services Group shares have consistently outperformed the simple moving average for 200 days or SMA (200). In addition, the stock has outperformed the S&P 500 index since August 31, 2011.
Demand for assisted and independent living facilities is set to increase in the coming years as the U.S. demographics are highly skewed toward an aging Baby Boomer generation. Given its considerable business association with diverse healthcare facilities, rising earnings estimates, modest growth projections, and a healthy dividend yield, Healthcare Services Group offers an enticing upside potential going forward.
Healthcare Services Group offers housekeeping, laundry, linen, facility maintenance, and dietary services to a diversified portfolio of nursing homes, retirement complexes, rehabilitation centers, and hospitals in the U.S. Since its inception in 1976, Healthcare Services Group has evolved as the largest independent housekeeping and laundry service for long-term care. With a market cap of $1.67 billion, the company currently has over 3,300 facilities under management.
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HEALTHCARE SERV (HCSG): Free Stock Analysis Report
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