To All: Try this on for size. The home health care sector has good
fundamentals (ie., people getting older; insurance companies wanting to
push people out of hospitals sooner), but has been under a short term earnings
cloud as Washington has been revising the medicare reimbursement rates
on some of their services--notably oxygen therapy. Washington has
now come out with the new rates and they hit hard--30% lower for oxygen
than last year. To some extent (eg, 20% cut) these numbers had been
factored into analysts estimates for 1998. Revisions are now under way.
The industry is consolidating, with big players quickly taking out their
weakened competitors. Current PE's are below the general market, while
long term growth is solid--above the general market.
I have gone through some of the players in this sector, and some seem
cheaper than others. Some numbers from First Call:
Last 60 5yrs
Price PE 97 EPS 98 EPS days ch EPS Gr PEG
AHOM $17 12.7X 1.34 1.09 -22% 23% .62
LNCR $47.69 15.9 2.99 2.76 -10% 20% .80
IHS $34.69 13.4 2.58 3.02 n.adj. 17% .79
AHG $16.94 11.5 1.47 1.13 -25% 15% .77
HCOR $ 7.63 8.9 .86 1.01 n.adj. -- --
PMSI $11. 14.5 .76 .84 n.adj. 24% .60
PSAI $21.88 19.5 1.12 1.20 - 9% 22% .84
The tax agreement won't have much effect on 97 earnings. In the last 60 days
analysts have started to ratchet down 98 estimates. Not all companies
have been adjusted--which is a function of the analysts, not the companies.
The lincare revisions are curious, since they are the only pure oxygen play
in the group. I would expect their 98 numbers to be adjusted further.
There are some substantial size differences between these companies.
Nevertheless, two I think are quite interesting relative to their peers:
HCOR has been on a 20% growth path, and sells at a much lower PE.
AHOM's and PMSI's 5 year PEG numbers are solidly below the others
(although PMSI's numbers are not as current, apparently--their 98
numbers have not been adjusted down).
Not as exciting as gold, perhaps, but you can always find sick people;
you can't always find gold.
js |
