Home Health Stocks Withstand March Coronavirus Turmoil
March was a tumultuous month for the U.S. economy, as the spread of the coronavirus across the country closed businesses, sent workers home and resulted in record unemployment.
The stock market plunged, then was bolstered late in the month after the implementation of federal economic stimulus packages including the $2 trillion CARES Act. Still, the S&P 500 finished down more than 14%. But the new Stoneridge Partners Home Health Index (HHI) and Post-Acute Care Index (PAI) show that while stock values for post-acute care providers were not spared from the abrupt downturn, some home health stocks avoided the market volatility and continued on an upward trajectory.
The Stoneridge Partners HHI tracks the stock values of Baton Rouge, Louisiana-based Amedisys Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group Inc. (Nasdaq: LHCG). Amedisys stock values were up more than 5% in March, while LHC Group’s stock saw a more than 13% bump – leading to a nearly 9% overall increase for the HHI compared to February.
“The market was incredibly volatile in March as the country faced unprecedented challenges due to the coronavirus,” Stoneridge Partners President Rich Tinsley said. “Home health stocks weren’t entirely immune to that, but they rebounded nicely because of continued macro-level headwinds and the fact home health providers play such a vital role in providing care during this global emergency.”
Home health providers were also buoyed by multiple regulatory actions taken by the Centers for Medicare and Medicaid Services (CMS), such as expanding telehealth rules, suspending the Review Choice Demonstration (RCD) and loosening homebound requirements under Medicare.
“CMS realizes how important in-home care is right now, especially with older adults self-isolating and maintaining social distance,” Tinsley said.
The results were not as positive for the post-acute care providers tracked by the Stoneridge Partners PAI.
Stock values for Frisco, Texas-based Addus were down almost 13% in March compared to February, and Birmingham, Alabama-based Encompass Health was down nearly 17%. Eagle, Idaho-based Pennant — the home health and hospice spinoff that was once part of The Ensign Group (Nasdaq: ENSG) — was down almost 92% in March compared to February. And Brentwood, Tennessee-based Brookdale Senior Living saw an eye-popping 110% decrease in its stock values.
“I’m not surprised that senior housing operators saw such large losses in March because they’re among those exposed to the most risk from the coronavirus. I’m confident those values will bounce back once we see our efforts to contain the virus begin to take hold across the country,” Tinsley said.
See It To Believe It!
The Stoneridge Partners Home Health Index (HH Index) is updated monthly and measures the performance of these two publicly traded home health companies, all listed on the NASDAQ:
- LHC Group (LHCG)
- Amedisys (AMED)
This graph compares the percentage of the Home Health Index to the percentage change in the S&P 500 Index going back to 2002.
This is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart.
This graph displays HH Index performance since 2002.
This graph compares the HH Index to the price of Addus stock (non-Medicare).
(Home Health Index April 2020 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||3/31/20||1 mos change||YTD change||3/31/19||3/31/18|
Although we track the performance of Addus, they are not included in our HH Index because very little of their revenue comes from Medicare.
Enterprise Value (EV)
|EV (in M)||3/31/20||3/31/19||3/31/18|
|HH Index Total||10100||7730||4249|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||252%||224%||123%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||23.13||23.21||18.53|
The Stoneridge Partners Post-Acute Care Index is updated monthly and measures the performance of these two publicly traded home health companies, all listed on the NASDAQ:
- LHC Group (LHCG)
- Amedisys (AMED)
- Addus (ADUS)
- The Pennant Group, Inc. (PNTG)
- Encompass Health (EHC)
- Brookdale Senior Living Inc. (BKD)
The above calculations are based on selling price being defined as Enterprise Value (EV), with data provided by Capital IQ. Enterprise value is defined as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents. EBITDA is calculated using methodology which may differ from that used by a company for its reporting. (Home Health Index April 2020 | Stoneridge Partners)
Home Health Index April 2020 | Stoneridge Partners