OK, here is a stock that is dog crap selling for less than the going price for dog crap, Novacare, Inc. (NOV). NovaCare, Inc. is a national leader in physical rehabilitation and employee services. The company treats patients in cost-effective outpatient and long-term care settings, and has achieved number one market shares in long-term care and orthotic and prosthetic rehabilitation. In addition, NovaCare is the nation's second largest provider of outpatient physical rehabilitation and occupational health services. Now the numbers:
Per-Share Data
Current price: $2.25
Book Value (mrq) $9.05
Earnings (ttm) -$1.76
Sales (ttm) $29.57
Cash (mrq) $0.24
Valuation Ratios
Price/Book (mrq) 0.21
Price/Earnings N/A
Price/Sales (ttm) 0.07
Income Statements
After-Tax Income (*ttm) $14.3M
Sales (ttm) $1.86B
Profitability
Profit Margin (ttm) 0.8%
Management Effectiveness
Return on Assets (*ttm) -8.14%
Return on Equity (*ttm) -19.24%
Financial Strength
Current Ratio (mrq) 2.54
Long-Term Debt/Equity (mrq) 0.97
Total Cash (mrq) $15.2M
Basically the stock tanked due to the effects of the 1997 Balanced Budget Act that reduced Medicare reimbursements for physical therapy in nursing homes, outpatient facilities, and at home care which is most of NOV's business. Since then management has begun restructuring and has sold off the prosthetics division to concentrate on core services and to retire debt.
They have also closed operations in long-term care markets that were detrimental to revenues and earnings and concentrating on those that are profitable. The following quote from the last 10-Q is also interesting, "''We are encouraged that the debilitating impact of the BBA on the long- term care industry has recently begun to attract attention at the Federal government's administrative and congressional levels,'' said Foster. ''We are actively working with the long-term care industry and other trade groups to obtain both regulatory and legislative relief that will ensure that adequate reimbursement is available to Medicare beneficiaries receiving needed services.'' If this is true, it will only help the company.
The following link is includes discussion from management about the rest of the company's services which I believe is positive.
These services have to be provided so I believe that NOV has an opportunity to be viable. Besides the long term debt obligations what am I missing here?
Looking for input,
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