October 1st Update

This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.  See archived updates below.  If you would like to receive a monthly e-mail of this update, please e-mail us your name and e-mail address to  partners@stoneridgepartners.com.

Quote of the Month:

 To tax and to please, no more than to love and be wise, is not given to man.” Edmund Burke

UPDATE: Another very good month for the S&P 500, what a nice rally….up 2.4% in September and now up 14.5% for the year.

The Stoneridge Partners Home Health Index (HH Index) has not fared so well, up only 0.5% for the month.   Although our Index is now up 38% for the year, that entire increase took place in the first quarter.  The only stock in our index that is up since April 1, 2012 is Gentiva;  the other three are all down.  On April 1, 2012 the HH Index was at 16.93 and on October 1 it was at 16.22.

LHC Group led this past month with a 6.1% increase.  Gentiva, after an explosive August, up 65%, continued with a 3.1% increase in September.

The high for our Index was set in September, 2008 at 41.75.

Both Almost Family and Amedisys were down for the month.  Gentiva has the greatest percentage gain for the year, up 68%.

Here are the results for the month of September and YTD:

Stock Price Change in %
8/31/12 9/30/12 Month YTD   
Almost Family 22.08 21.28 -3.62% +28.35%
Amedisys 14.08 13.82 -1.85% +26.67%
Gentiva 10.98 11.32 +3.1% +66.70%
LHC Group 17.40 18.47 +6.15% +43.96%
Home Health Index 16.14 16.22 +0.54% +37.86%
S%P 500 1406.58 1440.67 +2.42%% +14.56%

We also note that on October 1  Addus HealthCare’s stock was at 5.35, up 10% for the month.  This follows an increase of 10% last month.  They are now up a stellar 50% for the year.  They are a public company (NASDAQ:ADUS), but not in our HH Index.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through September, 2012.

Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through September, 2012.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through September, 2012.  Note the nice pop in the Gentiva stock.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 

EARNINGS SEASON – BY THE NUMBERS:


Because we feel this issue is so important we are repeating this chart from last month’s column.  Revenue and gross margin for all four companies, 2nd quarter 2012 compared to second quarter 2011.   We feel that this is the reason our HH Index is struggling.

 in thousands Q2 2011 Q2 2012 Difference Difference
Amedisys Revenue   368,424   378,498 10,074 2.7%
Gross Margin   178,998   166,232 (12,766) (7.1%)
% Gross Margin     48.6%     43.9%
Almost Family Revenue    81,721    86,892 5,171 6.3%
Gross Margin    42,106    41,554 (552) -1.3%
% Gross Margin     51.5%    47.8%
LHC Group Revenue   161,015   158,055 (2,960) (1.8%)
Gross Margin    74,999     65,837 (9,162) (12.2%)
% Gross Margin     46.6%     41.7%
Gentiva Revenue   448,712   427,691 (21,021) (4.7%)
Gross Margin   214,561   204,954 (9,607) (4.5%)
% Gross Margin     47.8%     47.9%
TOTALS Total HHI Revenue 1,059,872 1,051,136 (8,736) (0.8)%
Total HHI Gross Margin   510,664   478,577 (32,087) (6.3%)
% Gross Margin      48.2%      45.5% (2.7%)

This clearly shows why our HH Index is struggling.  Year-to-year total revenue  was down 0.8%, and, in gross profit dollars, it was even worse….down over $32 million or 6.3%.

We note that  total gross profit margin dropped 5.6%….from 48.2% to 45.5%, and every company was down in gross profit dollars.

Addus’ 2nd quarter revenue was 70.3 million, up 3% over last year’s 2nd quarter.  They were also up slightly in gross profit dollars, +1.5%.

MERGER & ACQUISITION ACTIVITY FOR THE MONTH

The Washington Post:  We were certainly surprised when the Post announced their acquisition of  Celtic Healthcare, a $43  million revenue, Pennsylvania based home care and hospice company.  Celtic was founded in 1996 by Arnie Burchianti, who will continue to run the business as CEO and co-owner.  The Post will provide capital for expansion.  Congratulations Arnie!

Gentiva:  Gentiva announced its acquisition of North Mississippi Hospice, based in Oxford, MS.

Prince of Peace Home Health, a Medicare agency in Phoenix, Arizona sold  to a local health care provider with Stoneridge Partners representing the Seller.

We believe that there will be a continuing upward trend in acquisition activity.  As our chart above shows, there has been no growth among these public home care companies.  Acquisitions will have to become the driving force toward future growth.

EBITDA Multiples: 

Multiples of EBITDA from earning results through the 2nd quarter 2012 with stock prices as of September 30, 2012.

Company Multiple of EBITDA
Almost Family 5.5
Amedisys 3.4
Gentiva 1.9

We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

VISIT US AT NAHC in Orlando October 22-24.  You will, as always, find us at our booth at the Expo.  We will also be giving two presentations.  The first presentation will discuss how to build the value of a home health agency or hospice for M&A purposes, and the second presentation will go through the entire process of negotiating a sale.

For this second presentation we will be joined by Brian Bruenderman, the Director of Development for Almost Family (NASDAQ:AFAM).  You will find this presentation not only very informative but also very entertaining.

www.nahc.org.

WEBINAR:  Check out the link at the top of this page to our October 16 Webinar where we will review the entire negotiating process of selling a home health agency or hospice.  Join us for a fun and fact filled session.

A Favorite Cartoon: 

Debate 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 

A repeat of a Favorite Cartoon:

Cartoon Expression

And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

[gravityform id=”2″ name=”Comments” ajax=”true”]