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MEDNAX, Inc. MD has been in investors’ good books on the back of its strategic measures and cost-curbing methods.
The company is better-placed for progress, evident from its favorable VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
The company managed to deliver a decent surprise history as its earnings beat estimates in two of the trailing four quarters (while missing the mark in the remaining two), the average surprise being 20.8%.
Here we discuss the reasons for retaining this currently Zacks Rank #3 (Hold) company in the investment portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This leading hospital company has an impressive inorganic growth profile. In 2019, the company closed its buyouts of nine physician group practices. This year, it bought one paediatric subspecialty practice for $2.1 million. We believe that these moves bode well for the long haul.
Moreover, the company finally completed the sale of MEDNAX Radiology Solutions to Radiology Partners for $885 million to focus on its core pediatrics and obstetrics business lines.
MEDNAX also sold American Anesthesiology, which is expected to mitigate cash losses induced by the coronavirus outbreak as well as lower its risk profile. Last year, the company further divested its MedData business to Frazier Healthcare Partners to aid its business rejig. The divestments are also expected to reduce its debt burden.
The company has been experiencing consistent revenue growth over the past several years on the back of operational excellence, inorganic growth via accretive acquisitions and strong segmental performances. This is evident from its CAGR of 6% during the 2015-2019 forecast period. Although in the first nine months of 2020, the metric dropped to some extent due to the COVID-19 effect, we expect the same to bounce back owing to strategic initiatives.
It is impressive to see that MEDNAX took many measures to cut down on expenses in response to the COVID-19 situation. After the sale of its American Anesthesiology on May 6, 2020, it also made strategic moves to minimize around $10 million in annualized expenses. The company expects to curtail its ongoing consulting expenses by early 2021.
However, MEDNAX withdrew its initial guidance for the full year due to the coronavirus impact on global economy.
The company’s long-term growth rate stands at 10%, higher than the industry's average of 7.8%.
Shares of this company have rallied 27.2% in six months' time, underperforming its industry’s increase of 56.3%.
Notably, other companies in the same space, such as HCA Healthcare, Inc. HCA, Acadia Healthcare Company, Inc. ACHC and Universal Health Services, Inc. UHS have also surged 57.1%, 83.4% and 35.8%, respectively.
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