Uncertainty over PDGM, Coronavirus Results in Setback for Home Health Stocks in February

The latest Home Health Index (HHI) from mergers and acquisitions advisory firm Stoneridge Partners shows home health stocks took a hit in February, bringing their recent momentum to an abrupt halt. The continued transition to the Patient-Driven Groupings Model (PDGM) and fear over the spread of coronavirus are the most likely culprits behind the decline, which mirrored an almost identical downturn in the broader market. Both the HHI and the S&P 500 were down just more than 9% for the month.

“After starting 2020 on a high note, home health stocks struggled in the second month of the year,” said Rich Tinsley, President and CEO of Stoneridge Partners. “Some of that we expected as companies are still in the early stages of their adjustment to PDGM. What we couldn’t necessarily have anticipated was the market’s response to the spread of coronavirus. Home health stocks were not spared from the downturn caused by fear over the virus’ arrival in the U.S.”

Last month, rising anxieties over the continued spread of coronavirus contributed to the largest single-week stock market downturn since 2008, with roughly $6 trillion in market value taken off the table.

Released monthly, the HHI follows the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group, Inc. (Nasdaq: LHCG). LHC Group bore the brunt of the HHI’s decline last month, losing 20% of its stock value compared to January. Alternatively, the stock value of Baton Rouge, Louisiana-based Amedisys was down just 1.43%.

Even considering February’s losses, LHC is still outperforming its market values from last fall. Over the trailing 12 months, LHC Group’s stock was up more than 14% as of February. Amedisys’ 12-month performance was even more impressive, up nearly 42%.

“Financially, both companies had a strong year in 2019,” Tinsley said. “And even though February was a tough month for the market in general, there are plenty of reasons for them to remain optimistic about the rest of 2020.”

Post-Acute Market Performance

The Stoneridge Partners Post-Acute Index (PAI) is now in its second month, tracking stock values for Encompass Health Corp. (NYSE: EHC), Brookdale Senior Living, Inc. (NYSE: BKD) and The Pennant Group, Inc. (Nasdaq: PNTG). Additionally, Stoneridge has moved its monitoring of stock values for Addus HomeCare Corporation (Nasdaq: ADUS) from the monthly HHI to the Post-Acute index.

Companies in the PAI also suffered setbacks in February. Addus stock values were down almost 24% in February compared to January. Similarly, stock values for Encompass Health and Brookdale were down nearly 3% and 0.30% compared to January, respectively.

Meanwhile, The Pennant Group — the publicly traded home health and hospice provider that spun off from The Ensign Group last year — saw its stock values buck the trend and climb by almost 3% in February compared to the previous month.

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 March 2020 | Stoneridge Partners)

Here are the results of the stock prices for the past two years:

Company 2/28/20 1 mos change YTD change 2/28/19 2/28/18
Amedisys 174.01 -1.43% +4.70% 122.65 59.21
LHC Group 121.46 -20.00% -11.83% 106.39 64.38
HH Index* 147.74 -9.06% -2.79% 114.52 60.85
S&P 2954.22 -9.18% -8.56% 2796.5 2718.5
Addus 76.27 -23.69% -21.55% 66.35 34.35

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) 2/28/20 2/28/19 2/28/18
Amedisys 6320 4010 2020
LHC Group 4400 3680 1310
HH Index Total 10720 7690 4278
Addus 1230 761 410

Enterprise Value (EV), aka Selling Price, as Percent of Revenue

Company 2/28/20 2/28/19 2/28/18
Amedisys 323% 247% 134%
LHC Group 214% 232% 131%
HH Index Average* 269% 240% 128%
Addus 206% 156% 99%

Multiples of EV/EBITDA

Think of this as selling price as a multiple of EBITDA.

Company 2/28/20 2/28/19 2/28/18
Amedisys 26.40 24.39 16.08
LHC Group 22.68 27.61 13.99
HH Index Average* 24.54 26.00 19.02
Addus 31.93 20.31 12.02

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 March 2020 | Stoneridge Partners)


Home Health Index March 2020 | Stoneridge Partners

From Rich Tinsley, Publisher of “Home Health Index”. Rich can be reached at rich@stoneridgepartners.com or (239) 561-0826 and toll-free 800-218-3944

Previous editions of this monthly newsletter can be searched for at the bottom of the home page of the Home Health Index. Links to Google Finance: Amedisys | LHC Group

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