Here's Why You Should Buy Amedisys (AMED) Stock Now
Amedisys, Inc. AMED has been gaining investor confidence on strategies like acquisitions and partnership expansion. Bright Personal Care prospects are encouraging as well. Further, the company has raised its full-year 2021 guidance, raising optimism on the stock. However, factors like escalation in operating expenses and expensive valuations are likely to offset the positives to some extent.
The provider of home health and hospice services in the United States to the growing chronic, co-morbid, and aging American population has a market capitalization of $8.45 billion. The company has an earnings growth rate of 12% for the next five years.
With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment. Over the past six months, the stock has gained 6.8% compared with the industry’s 4.9% rally and 13.9% rise of the S&P 500.
Let’s delve deeper.
Acquisitions & Partnerships to Add Value: Amedisys is focused on developing and acquiring new business lines that will complement its existing home care and hospice business.
In this regard, in May 2021, Amedisys entered into an acquisition deal to purchase the home health and hospice care operations of non-profit Visiting Nurse Association (“VNA”). This will help Amedisys expand its presence in Omaha and Council Bluffs’ healthcare communities. During the time of the unprecedented healthcare crisis, we believe this latest investment by Amedisys in the growing space of home health and hospice might prove to be strategic and well timed.
In April 2021, Amedisys entered into a definitive agreement to acquire regulatory assets that enable the company to carry out home health care operations in Randolph County, North Carolina. Upon closure of the deal, Amedisys will open a start-up care center to serve patients in the newly-acquired service area.
Bright Personal Care Prospects: Amedisys is working on expanding the geographical presence of the Personal Care business through inorganic expansion. Recently, the company expanded its dialysis partnership in Massachusetts to include several Aging Services Access Point (ASAP) organizations. Further, Amedisys continued close-to-core innovation by expanding the utilization of nationwide personal care partnerships three times in late 2020. The company also developed SNF-at-home product solutions to take care of higher acuity patients.
Upbeat Guidance: Net service revenues for 2021 are projected in the range of $2.30-$2.34 billion (up from the previously guided $2.27-$2.31 billion). Moreover, adjusted earnings per share are projected in the band of $6.85-$7.07 (up from the previous $6.25-$6.47). The raised guidance indicates continuation of the company’s bullish trend.
However, escalating costs and expense pressure remain concerns. Amedisys’ first-quarter cost of service increased 4% year over year. Total salaries and benefits rose 14% year over year.
Further, Amedisys' P/E (F12M) ratio is expensive in comparison to the broader industry. The company is currently trading at a forward P/E (F12M basis) ratio of 36.7 for the past year, whereas the current P/E ratio (F12 basis) for the industry it belongs to is 24.2.
Estimate Trend
Amedisys has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved 9.5% north to $6.90.
The Zacks Consensus Estimate for the company’s second-quarter fiscal 2021 revenues is pegged at $564.4 million, suggesting 16.4% growth from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks from the broader medical space are National Vision Holdings, Inc. EYE, Owens & Minor, Inc. OMI and Envista Holdings Corporation NVST. While National Vision and Owens & Minor sport a Zacks Rank #1 (Strong Buy), Envista Holdings carries a Zacks Rank 2. You can see the complete list of Zacks #1 Rank stocks here.
National Vision has a projected long-term earnings growth rate of 12%.
Owens & Minor has a projected long-term earnings growth rate of 15%.
Envista Holdings has an estimated long-term earnings growth rate of 26%.
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