Tuesday, January 10, 2006

Amedisys Inc (AMED) Analysis

Amedisys is a company based in Louisiana that provides in home nursing service. The company operates primarily in the south and has been one of the top performing companies in the stock market. Amedisys has about two thousand five hundred employees. Amedisys is a multi-regional provider of home health care nursing services. Operating 80 home care nursing offices in the southern and southeastern US, the company provides a variety of home healthcare and outpatient surgery services. Home healthcare service includes nursing and allied health services, infusion therapy, respiratory therapy, and home medical equipment. The company also provides disease management and hospice services. Medicare, Medicaid, private insurance carriers, and other local health insurance programs pay for their clients' use of Amedisys' services.

In this section, we will analyze AMED's financials and key ratios to see if it is a worthwhile investment.

AMED has a market cap of 730 million and a trailing P/E of 25. It has had a phenomenol growth in stock price in the past one year with its one year lows at around 27.8 and highs at 47.66. The company was affected by the hurricanes and two of its centers are still not operational. Amed derives >90% of its revenue through medicare and about 7% from hospital care.

Looking at the AMED balance sheets, the operating profit margins range from 14% to 12%. In particular the operating margins have declined from 15% in three months ending in June 30th to ~12% in the quarter ending in September 30th. The year over year earnings growth is 62%. In the quarter ending on September 30th, earnings growth was close to 91% but the expenses were also high. The earnings grew by 59% but the earnings per share grew by only 23%. The earnings didnt grow as fast because of the huge dilution in shares to the tune of 24%. The share dilution is a concern as the acquisitions are typically paid in capital. From Amed's 10K statement, the number of outstanding shares increased from ~4 million in 2000 to about 15 million now. In the 10-K, the company also mentions that the stock prices could fluctuate because of the exercising of stock options, employee stock purchase plan. The number of shares not vested totals close to a million - about 6.7% of outstanding stock. It also looks as though the company does 401K matching through company stock causing further dilution. There is also a law suit against the company regarding the way the stock declined between 2000 and 2001.

The stock is currently not cheap but the company is growing very quickly. The market for the kind of service Amed is providing is expected to grow as baby boomers age. The risks to the stock value is the rate of dilution of Amed stock.

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