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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerLHC Group (NASDAQ: LHCG) provides
post-acute healthcare services, primarily to Medicare beneficiaries in rural southern U.S. markets. The firm's 150 home nursing agencies provide skilled nursing, physical therapy, speech therapy, occupational therapy and medically-oriented social services. Its ten hospices offer pain management, palliative medication, homemaker services and counseling. Its four acute care facilities provide services to patients who have transitioned out of a hospital intensive care unit with complex medical conditions. The company also provides rehabilitation services.
LHC pleased investors late last month, when it reported Q1 EPS of 31 cents and revenues of $83.5 million. Analysts had been expecting 29 cents and $78.7 million. Last week, the firm agreed to buy Home Care Solutions, a Nashville outfit with $11 million in annual Medicare revenues. That led LHC to revise its FY08 EPS guidance to $1.30-$1.40 ($1.30 consensus) and FY08 revenue guidance to $340-$360 million ($345.63M consensus).
The LHCG
share price popped into a "flag" consolidation pattern on the Q1 news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the issue with six "strong buys," two "buys" and three "holds." Analysts see an 18% average annual growth rate, through the next five years. The LHCG P/E ratio (17.22), PEG ratio (0.94), Price to Sales ratio (1.17), Price to Book ratio (2.42), Price to Cash Flow ratio (12.01), Price to Free Cash Flow ratio (19.73), Sales Growth rate (21.54%), Return on Assets (15.48%) and Return on Investment (25.94%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 77% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $13.55 and $29.95. A stop-loss of $18.10 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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