Amedisys, Inc. AMED has been gaining investors’ confidence on consistent positive results. Over the past three months, the company’s share price has outperformed the broader industry. The stock has gained 13.2%, as against the broader industry’s 10.5% decline. Also, the company has outperformed the S&P 500’s 6.5% gain.

This renowned home health and hospice services provider has a market cap of $1.91 billion. The company’s five-year projected growth rate is also favorable at 18.5% compared with the industry’s 11.8%.

With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.

The company’s estimate revision trend for the current year has been positive. In the past 60 days, five analysts revised their estimates upward with no movement in the opposite direction. Resultantly, earnings estimates increased around 0.9% to $2.23 per share over the same time frame.

Per Zacks Style Score system, Amedisys has a Value Score of B that reflects the company’s solid prospects. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.

 

 

Additionally, the company exhibits a VGM Score of B. Here V stands for Value, G for Growth and M for Momentum. Per our research, VGM Score is simply a weighted combination of these parameters and is a comprehensive tool that allows investors to filter through the standard scoring system and pick the winning stocks.

In this regard, Amedisys has a favorable Price/Earnings to Growth (PEG) ratio of 1.36 as compared with the broader industry’s 1.64. With an attractive three-to-five-year projected earnings growth rate of 18.5%, Amedisys again scores higher than the industry’s 11.8%.The company also boasts better leverage ratios when compared with  the broader industry. Amedisys has a favorable Debt/Equity ratio of 0.16 compared with the industry’s 0.30.

Let’s find out whether the recent positive trend is a sustainable one.

Amedisys posted a solid third-quarter 2017 results, wherein earnings and revenues improved year over year.

Moreover, the company has a long-term strategy to evolve from a traditional home health and hospice care company to one that is focused on bringing home a continuum of care. This is because Amedisys intends to better serve patients and diversify sources of payment so as to become less reliant on Medicare. In this regard, the company experienced an improvement in non-Medicare revenues while Medicare revenues declined within the Home Health division in the third quarter.

Also, a favorable 2018 Home Health Final Rule buoys optimism in the stock.  According to a report by HEALTHCAREfirst, the 2018 Home Health Final Rule was finalized without the implementation of the Home Health Groupings Model (“HHGM”) scheduled for rollout in 2019. HHGM is an alternative case-mix adjustment methodology that would have used 30-day periods, rather than 60-day episodes. Going forward, the company expects to implement this rule, which might impact the business.

We believe that the home health industry is poised to grow significantly in the near term driven by the positive demographic trend in the United States. Meanwhile, Amedisys should continue to benefit from the aging demographics of the U.S. population and the need for higher acuity patients in a home nursing environment. 

Also, Amedisys’ Personal Care segment has been stabilizing and performing well as the company integrates recent tuck-in acquisitions. Moreover, Amedisys is looking forward to huge growth prospects within this segment.  With the recently-announced Intercity acquisition, the company has closed a total of three personal care acquisitions since last September and is awaiting regulatory approval to complete the buyout of East Tennessee Personal Care Services.

Furthermore, the company’s strong cash balance position bolsters investor’s confidence in the stock.

On the flip side, escalating operating expenses and declining gross margin continue to pose threats. Also, an intense competitive landscape and regulatory concerns remain challenging in the home health and hospice industry.

Other Key Picks

Some other top-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS, Myriad Genetics, Inc. MYGN and Luminex Corporation LMNX. While, PetMed and Myriad sport a Zacks Rank #1, Luminex Corporation carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed has a long-term expected earnings growth rate of 10%. The stock has rallied roughly 79.4% in a year.

Myriad Genetics has a long-term expected earnings growth rate of 15%. The stock has gained 12.1% over the last three months.

Luminex has a long-term expected earnings growth rate of 16.3%. The stock has gained 14.8% over the last three months.

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