Is It Too Late To Consider Buying AdaptHealth Corp. (NASDAQ:AHCO)?
While AdaptHealth Corp. (NASDAQ:AHCO) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the NASDAQCM over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on AdaptHealth’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for AdaptHealth
What Is AdaptHealth Worth?
AdaptHealth appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that AdaptHealth’s ratio of 45.25x is above its peer average of 23.6x, which suggests the stock is trading at a higher price compared to the Healthcare industry. In addition to this, it seems like AdaptHealth’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will AdaptHealth generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. AdaptHealth's earnings over the next few years are expected to double, indicating a very optimistic future ahead. This should lead to stronger cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? AHCO’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe AHCO should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on AHCO for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for AHCO, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into AdaptHealth, you'd also look into what risks it is currently facing. To that end, you should learn about the 3 warning signs we've spotted with AdaptHealth (including 1 which is significant).
If you are no longer interested in AdaptHealth, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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