1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
shadowstock
shadowstock
Articles (12) 

Home Healthcare: Heavily Shorted Long Opportunity

May 30, 2011 | About:

This idea was generated with an attempt to find a potentially misinformed outsized short position.

AMED: Amedisys Inc

Industry: Home Health Care

Shorts as a percentage of float: 25.70% per Yahoo (YHOO) but my calculation is slightly different at 21.80%

If Yahoo reported shares available in the float is correct at 28.89 million and NASDAQ reported shares short at 6,299,371 million on May 13, 2011, my calculation is 21.80% = 6,299,371/28,890,000.

From Feb. 15, 2011, the stock price was $35.98 and is currently $31.11 down 13.15%.

Over the past three months the health care industry is up 11.91% based on data from Morningstar versus AMED down -13.15%. It this 25% three-month spread partially driven by misinformed short sellers?

The shares shorted did increase by 16.42% or 888,541 additional shares. On Feb. 15, 2011, the shares shorted were 5,410,830 and increased to 6,299,371 on May 13, 2011. The short as a percentage of the float increased by 3.08%[888,541/28,890,000=3.08%] over this three-month period and added to reach the current Yahoo reported 25.70% shares short as a percentage of the float.

One potential negative three-month driver on the share price was the FY 2011 EPS guidance. It was below analysts’ estimates reported on Feb. 2, 2011.

Medicare cut backs are a real concern for investors. But the shorts may be pushing their luck as the stock has posted a negative 37% 52-week return. This well-managed company willing to make acquisitions may surprise and create a short-term explosive opportunity and a long-term value play at these depressed prices.

Others in the home health care industry:

Symbol, 52WeekChange, CompanyName

CHE 17.40% Chemed Corp.

LHCG -12.99% LHC Group, Inc.

KAD -76.67% Arcadia Resources In

GTIV -13.50% Gentiva Health Servi

AHCI -4.49% Allied HealthCare International

NHC 35.30% National Healthcare

AFAM -16.19% Almost Family Inc.

AMED -37.43% Amedisys Inc.

ANCI -13.30% American Caresource Holdings

PHC 170.09% PHC Inc.



AMED Fundamentals

Market Cap = 916 million

Enterprise Value = 940 million

ROIC TTM = 8.50% respectable but below the historical average

Gross margins have been compressing and will most likely continue with health care reform.

FCF/Sales TTM are still healthy at 7.80%



The three-year stock return is -15.55%

Although the GM percentage has declined, the GM total amount as a percentage of the enterprise value has increased as additional gross profits dollars are growing but at a lower margin percentage rate. Economic value is being created without a growing GM percentage or growing ROIC percentage.

Gross Profit/EV for 2010 = .55 substantially improved compared to the 2007 GP/EV = .36.

EBITDA/EV for 2010 was 16%: greater than 2008 and 2007 but less than the 18% for 2009.

TTM P/B at 1.13 improved over the P/B for 2010 at 1.2; 2009 at 1.9; 2008 at 2; and 2007 at 2.80.

EV/CF was 5.92 for 2010 and 7.51, 10.21, 14.93 and 16.77 for 2009 to 2006 respectively.

EV/Sales is currently sitting at .59.

This well-managed company with a strong balance sheet is not going bankrupt, so the 25.70% short to float ratio will be forced to buy back. This coupled with continued solid financial results will move the stock higher short and long term.

http://shadowstock.blogspot.com/


Rating: 4.3/5 (11 votes)

Comments

Please leave your comment:


GuruFocus Mobile App


User Generated Screeners


pbarker468 values
pbarker465 year low
RiteshXSharmaDefense Stocks
DANGORDONMARGIN SAFETY 7-31-16
DANGORDONMARGIN SAFETY 7-30-16
Cyc2013M-Screen 7-30-16 v2
Cyc2013M-Screen 7-30-16
kkopacz.bizGetPeterLynchScreens_v3
kkopacz.bizGetPeterLynchScreens_v2
kkopacz.bizGetPeterLynchScreens

Select portfolio(s):

  • Loading...

Why you are interested?

Your selection and notes will be stored in your portfolio.

Login to add portfolio
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK