A Look at Proposed Tax Changes; Stock Values Stay Steady in April
Home Health Index | 2021 May Update
The Biden administration has proposed a number of changes to current tax laws, including potential increases to both the corporate and capital gains tax rates, in an effort to fund new infrastructure and social services priorities. While these proposed changes must still be approved by Congress, Stoneridge Partners President and CEO Rich Tinsley, JD, CPA says now is the time to consider how those changes might affect the future sale of your home health, home care, hospice or behavioral health company.
“The proposal essentially doubles the top federal tax rate on capital gains over $1 million, which could have a significant impact on sellers in the future,” said Tinsley. “Not only will it reduce how much an owner gets to keep after they leave the closing table, but it could give buyers more negotiating strength and have an effect on valuations.”
In a new article available at www.stoneridgepartners.com, Tinsley argues that owners thinking about a future exit strategy should keep a close eye on any upcoming tax moves – and reach out to an experienced advisor well in advance of a potential sale.
“Complex transactions like these take a lot of time and effort, and there’s always a risk that the sale won’t be completed before tax law changes go into effect,” he said.
Want to know more about how potential tax changes might affect a future sale of your home health, home care, hospice or behavioral health company? Click here to read the full article on the Stoneridge Partners website.
Home Health and Post-Acute Care Indices
After a strong rebound in March, stock values for the companies tracked by the Stoneridge Partners Home Health (HHI) and Post-Acute Care (PAI) indices continued their steady climb in April.
The HHI was up by nearly 4% compared to the previous month, and the PAI performed similarly – up nearly 5% for the same time period. Both indices closely mirrored the S&P 500, which climbed by almost 5% in April.
Home Health Index
The Stoneridge Partners HHI monitors the stock values of Baton Rouge, Louisiana-based Amedisys, Inc. (Nasdaq: AMED) and Lafayette, Louisiana-based LHC Group, Inc. (Nasdaq: LHCG). LHC Group outperformed its March results, with stock values rising by nearly 8% in April. Meanwhile, Amedisys stock stayed relatively flat, rising by less than 1%.
Post-Acute Care Index
Stock values for Amedisys and LHC Group are combined with monthly results for Addus HomeCare Corporation (Nasdaq: ADUS), Brookdale Senior Living, Inc. (NYSE: BKD), Encompass Health Corp. (NYSE: EHC) and The Pennant Group, Inc. (Nasdaq: PNTG) to make up the Stoneridge Partners Post-Acute Care Index (PAI).
Like March, April was a mixed bag for the additional companies tracked by the PAI.
Birmingham, Alabama-based Encompass Health extended its gains from last month, with its stock values rising by nearly 4%. The next few months will likely prove to be crucial for Encompass; the company is exploring a potential sale or spinoff and searching for a new CEO to lead its home health and hospice business. Meanwhile, stocks for Frisco, Texas-based Addus also moved in the right direction this month, coming off a dip in March to post a gain of almost 1% in April.
However, Eagle, Idaho-based Pennant and Brentwood, Tennessee-based Brookdale found themselves on the other end of the spectrum in April. After tumbling by more than 12% in March, Pennant’s stock values took another hit last month, falling by another 13%.
And after a strong performance in March, April was a reversal of fortune for Brookdale, with its stock values falling by more than 2%.
Quote of the Month
“I think the pandemic has increased awareness in this area. Mental health is real, and it’s not something that just impacts other people. We all could be one traumatic experience away from trouble.” – Alicia Leslie, Behavioral Health Manager for Fort HealthCare
Read the Full Article Here: COVID-19 and Mental Health
Articles Featuring Stoneridge
Sign up for our next Speaker Series: June 8, 2021, 2:30pm.
View our quarterly M&A webinars on current valuation trends, deal flow, and pertinent regulatory changes in home health, home care, hospice, ID/DD, and behavioral health industries. Visit the Speaker Series Webinar Library on our website.
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 2010.
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
(Home Health Index May 2021 | Stoneridge Partners)
Here are the results of the stock prices for the past two years:
||1 mos change
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)
|HH Index Total
Enterprise Value (EV), aka Selling Price, as Percent of Revenue
|HH Index Average*
Multiples of EV/EBITDA
Think of this as selling price as a multiple of EBITDA.
|HH Index Average*
The Stoneridge Partners Post-Acute Care Index is updated monthly and measures the performance of these six publicly traded post-acute care 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 May 2021 | Stoneridge Partners)
Recent Transactions From Around The Country
- Family Tree In-Home Care acquired HomeCare of the Rockies.
- AMN Healthcare Services Inc. acquired full-service virtual care management company Synzi.
- Senior Care Authority, a senior placement and elder care consulting franchise, has acquired Beyond Driving with Dignity.