The Medical Outpatient/Home Care sector is really getting pounded. I'd welcome feedback on whether there are good values there.
Here's a list of stocks in this sector:
biz.yahoo.com
The ones that interest me the most are not the laser vision stocks you see at the top of this list (which is sorted by average analyst ranking), but rather the medical care stuff that has a lower analyst ranking.
Here's a link I made with charts and valuations for some of the stocks from the middle of the list:
quote.yahoo.com
You can see from the charts that stocks in this sector are really beaten up. It looks like there must be some sector rotation going on here, plus maybe the usual problem of small cap stocks underperforming the market.
I especially like RHB, which has appeared many times in the Forbes annual list of best small companies. It is now trading at 8X earnings, 7X cash flow from operations. It has a good financial model, with an ROE of 26%, and an eps growth rate of 25% CAGR over the last 5 years. Analysts expect the growth rate to slow to 18% in 2000, but even so, the PEG works out to a cheap 8/18 = 0.44.
The sector-specific concerns might include changes in medicare reimbursement.
Companies that do outsourcing, like RHB, will actually gain from reduced medicare reimbursement. That's because they don't do the billing, but rather operate on an hourly fee. As higher cost providers like hospitals are squeezed, they are motivated to replace their expensive in-house staff with outsourced staff to reduce costs, and this will grow the top line for the outsourcing companies.
Any opinions? |
