MEDNAX Inc. MD has been in investors’ good books on the back of its healthy revenue stream and strategic initiatives.
The company has also been adopting measures to boost its portfolio and enhance its capabilities.
Its VGM Score of A is also impressive. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
Now let’s see what makes this stock an investor favorite.
Riding high on operational efficiency and inorganic growth story, MEDNAX has been witnessing solid revenue growth over the past many years. The company saw a CAGR of 12.3% between 2012 and 2018. In the first nine months of 2019, its top line inched up 1.6% year over year. We expect MEDNAX to witness revenue growth in the coming quarters on strategic initiatives.
Acquisitions and divestitures have been a major catalyst. Significant buyouts including that of vRad in 2015 helped the company expand its services in telemedicine. In 2018, the entity acquired nine physician group practices. Following this trend, in the first nine months of 2019, MEDNAX closed the transactions of two neonatology physician practices, two maternal-fetal medicine physician practices and two other pediatric subspecialty practices.
MEDNAX has been affiliated to Boca Radiology Group, P.A., a private radiology physician group based in Boca Raton, FL. This move is in line with the company’s strategy to widen its radiology practices, thereby cementing its position as one of the leading players in the nation. Notably, MEDNAX reads 11.8 million studies per year through its chain of more than 825 board-certified or eligible radiologists.
In October 2019, MEDNAX divested its MedData business to Frazier Healthcare Partners. The divestiture is expected to further strengthen the company, both financially and strategically as well as help it concentrate more on its core business. This strategic action will also likely aid it to pay down debt.
However, the company has been enduring elevated debt levels for the past many years. Long-term debt piled up at 45%, on average, from 2014 to 2018. Moreover, interest expenses have been escalating since 2015. The company’s high-debt level and decreased interest servicing capability raise its financial risk.
In the past year, shares of this Zacks Rank #3 (Hold) company have shed 24.3% of value against its industry’s growth of 13%.
Stocks to Consider
Investors interested in the medical sector might consider some better-ranked stocks like Humana Inc. HUM, WellCare Health Plans, Inc. WCG and The Joint Corp. JYNT.
Humana operates as a health and well-being company in the United States. For the trailing four quarters, the company delivered an earnings beat of 8.6%, on average. It currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
WellCare Health offers managed care services to government-sponsored health care programs. The company came up with a positive surprise of 17.3%, on average, for the preceding four quarters. It currently sports a Zacks Rank #1.
The Joint Corp. develops, owns, operates, supports and manages chiropractic clinics. For the last four quarters, the company has an earnings beat of 175.8%, on average. The stock is presently Zacks #1 Ranked.
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