Amedysis ( $AMED ) was on fire today, finishing up 8.72% and making a new 52 week closing high of $31.67. The large move was mostly inspired by an upgrade over at Suntrust, who raised their price target on the stock to $36 from $31, and moved their rating up to Buy from Neutral. The stock has mostly struggled in 2015, but today's swing puts the stock up 7.9% on the year, a gain that outpaces all the indexes year-to-date. Not too bad so far, considering it was up 116% in 2014... but i think there is more to come, and the stock will close the year above $40, which is a 30% move from it's current price ( A target I put on the stock during my Top 5 Stocks for 2015 Webinar back in December.)
Here are some of the reasons why:
- The company is finally finding it's footing after paying $150 million to settle Medicare fraud allegations.One of the main reasons for the stock price falling from $64 in 2010.
- The company has brought in a new, experienced leadership team:
- In December they replaced the interm CEO with Paul B. Kusserow from Humana ( $HUM )
- And also added:
- 38-year Humana veteran executive Bruce D. Perkins to the Board of Directors.
- Dan McCoy as Chief Operating Officer. Previously, he was SVP of Operations at Anthem.
- Martin Howard as Chief Information Officer. Previously, he was Director of Strategy and Operations for Deloitte Consulting.
- Larry Pernosky as Chief Human Resources Officer. Previously,he was VP of Human Capital Consulting at Humana.
- Stephen Seim as Chief Strategy Officer. Previously, he led Humana's Corporate Strategy Team.
- David Kemmerly as SVP of Government Affairs. Previously, he was Special Counsel at the law firm Adams and Reese LLP.
- The company is focusing on cutting costs, and growing earnings, which they showed in this most recent quarter, where they beat earnings estimates by .10 or 50%. .There maybe some possible restructure costs that may weigh on earnings in the next few quarters, but think folks will take out those numbers and focus on the underlying growth, which has been strong - analysts are expecting earnings to grow over 110% YOY.
- Although the top line growth has been flat, it has been more of a function of company looking to get it's balance sheet in order, and looks like the declines have stabilized over the last few quarters. Despite the revenue slowdown, the company still trades at less than 1x's its revenues, which is mostly below it's peers. They have also paid down $100 million in debt over the past year, and are in a stronger position for future opportunities to grow.
- M&A seems to be back on the table, whether through acquisitions or through a possible merger. It was discussed on the Q1 earnings call as well , and seems like something maybe imminent. On top of that, there is also North Tide Capital, who owns a 12% stake in Amedysis ( $AMED ) and a 11.5% in Almost Family ( $AFAM) . North Tide sent a letter in December of 2014 urging a merger between the two companies, citing synergies, costs savings, and a higher valuation for a combined entity. I am sure they will continue to look for ways to push management in this direction.
These are just a few of the reasons why I like this stock even after hitting 52 week highs today, and despite the huge move in 2014. It seems more analysts are starting to believe in the story, and think the Suntrust Upgrade today, will be just one of many over the next few months.
Think the stock trades into the $35 area in the coming weeks and added more June $33 calls today to take advantage of that move: