Home Health, Post-Acute Care Stocks Values Continue to Gain Ground in May
After two months of uncertainty, the U.S. economy continues to show small but clear signs of stabilization. And according to the latest Home Health (HHI) and Post-Acute Care (PAI) Indices from mergers and acquisitions firm Stoneridge Partners, that’s especially true for post-acute and home health providers.
An influx of coronavirus relief funding distributed by the U.S. Department of Health and Human Services (HHS) under the CARES Act continued to lift healthcare stock values in May, particularly for home health providers, which received roughly $1.7 billion from the Act’s Provider Relief Fund.
“Home health and post-acute stocks followed up their April gains with even better performance in May,” said Stoneridge Partners President Rich Tinsley. “That’s partly because of the relief funding and regulatory waivers that Medicare providers have received, but also because of the continued focus on home-based care nationally.”
Home Health Index
The Stoneridge HHI follows the stock values of Baton Rouge, Louisiana-based Amedisys Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group Inc. (Nasdaq: LHCG). Amedisys stock values improved by more than 4% in May compared to April, and LHC Group stock soared 20% higher during that same period – resulting in an 11% improvement for the overall HHI in May. In comparison, the S&P 500 rose by just more than 4%.
Post-Acute Care Index
Stoneridge also tracks stock values for post-acute care companies in its PAI, which includes both Amedisys and LHC Group, plus Addus HomeCare Corporation (Nasdaq: ADUS), The Pennant Group Inc. (Nasdaq: PNTG), Encompass Health Corp. (NYSE: EHC) and Brookdale Senior Living (NYSE: BKD).
Eagle, Idaho-based The Pennant Group saw the biggest month-over-month stock value increase in May, shooting up more than 22% over April’s results. Frisco, Texas-based Addus, and Birmingham, Alabama-based Encompass Health saw their stocks climb by 18% and nearly 10%, respectively, during that same period. Brookdale, meanwhile, saw more modest gains, as its stock rose by just more than 1% in May compared to April.
“Brookdale has some additional challenges as a senior living operator,” Tinsley said. “ They care for seniors in communal settings, and those types of providers have been hit hard by the coronavirus. Their pandemic response efforts have looked different from what we’ve seen from home-based care enterprises, and their financial recovery will likely look different as well.”
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 June 2020 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
|Company||5/31/20||1 mos change||YTD change||5/31/19||5/31/18|
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)||5/31/20||5/31/19||5/31/18|
|HH Index Total||11840||7820||3940|
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*||292%||210%||149%|
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*||26.27||21.30||17.05|
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)
This graph displays Post-Acute Care Index performance starting late 2019.
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 June 2020 | Stoneridge Partners)
Home Health Index May 2020 | Stoneridge Partners