Unveiling Apollo Medical Holdings (AMEH)'s Value: Is It Really Priced Right? A Comprehensive Guide
Apollo Medical Holdings Inc (NASDAQ:AMEH) has experienced a daily loss of 16.2% and a 3-month loss of 1.79%, with an Earnings Per Share (EPS) of 1.06. Despite these figures, the question arises: is the stock significantly undervalued? This article aims to answer this question through a detailed valuation analysis. Read on to explore the intrinsic value of Apollo Medical Holdings (NASDAQ:AMEH).
Company Introduction
Apollo Medical Holdings Inc is a patient-centered, physician-centric integrated population health management company, focused on providing coordinated, outcomes-based medical care in a cost-effective manner. It is primarily concerned with high-quality medical care, population health management, and care coordination for patients, particularly senior patients and patients with multiple chronic conditions. The current stock price of AMEH is $31.76, while the GF Value, an estimation of fair value, stands at $56.35. This discrepancy paves the way for an in-depth exploration of the company's value.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher.
As per GuruFocus Value calculation, Apollo Medical Holdings (NASDAQ:AMEH) appears to be significantly undervalued. The current price of $31.76 per share and the market cap of $1.50 billion indicate that Apollo Medical Holdings stock is significantly undervalued. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength of Apollo Medical Holdings
Investing in companies with poor financial strength carries a higher risk of permanent loss of capital. Hence, it's crucial to review the financial strength of a company before deciding to buy its stock. A good starting point for understanding a company's financial strength is looking at its cash-to-debt ratio. Apollo Medical Holdings has a cash-to-debt ratio of 1.29, which is better than 58.87% of 654 companies in the Healthcare Providers & Services industry. This indicates that the financial strength of Apollo Medical Holdings is strong.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Apollo Medical Holdings has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $1.30 billion and Earnings Per Share (EPS) of $1.06. Its operating margin is 8.64%, which ranks better than 69.09% of 647 companies in the Healthcare Providers & Services industry, indicating fair profitability.
Another important factor in the valuation of a company is its growth. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Apollo Medical Holdings is 17.7%, which ranks better than 70.93% of 571 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is 22.4%, which ranks better than 67.75% of 524 companies in the same industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Apollo Medical Holdings's return on invested capital is 8.75, and its cost of capital is 8.59.
Conclusion
In conclusion, the stock of Apollo Medical Holdings (NASDAQ:AMEH) shows every sign of being significantly undervalued. The company's financial condition is strong and its profitability is fair. Its growth ranks better than 67.75% of 524 companies in the Healthcare Providers & Services industry. To learn more about Apollo Medical Holdings stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
