LHC Group (LHCG, $114.61): “Can the LHC Group reach the end of this Marathon?”
By: Clarissa Vazquez, AIM Student at Marquette University
Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.
· LHC Group (NASDAQ: LHCG) is a market leader that operates in the United States by providing post-acute healthcare services. LHCG provides care for patients in nursing homes, hospice, community-based living spaces, or in long-term acute care hospitals.
· LHCG operates in five main segments: home health is their largest segment which makes up 71.4%, hospice makes up 11%, home and community-based makes up 9.5%, facility-based makes up 6.3%, and healthcare innovations make up 1.8%.
· LHCG is currently entering into a joint venture model to continue to grow their business. In September 2019, LHCG finalized its agreement with Norton Healthcare company. Through this joint venture, the two organizations will share ownership of the Caregivers Health Network. They will be able to provide patients and families in Louisville high-quality affordable healthcare services in the comfort of their homes.
· LHCG’s management is well versed in keeping track of payments and regulatory reform. The hospital LHCG partners with help offset the impact of PDGM given higher payments from institutional admission sources.
· LHCG is focused on cutting cuts, but with providing the best care; they believe that optimizing care plans that move towards more efficient industry benchmarks can generate 1-7% in savings. They seek to do this through finding a proper mix of therapy staffing which includes highly skilled nurses which came from when LHCG acquired AFAM’s LPN mix which is 35-40% vs legacy LHCG’s LPN mix of 55-60%.
· LHCG has gone up since being added to the AIM portfolio which was brought on November 9, 2018, for $94.47 which now is currently trading at $114.61, which is showing a 21.31% increase from the purchase price.
LHC Group is highly focused on providing the proper mix of care to their patients which will help result in high-quality care along with cutting down their cost. By finding companies that fit into their joint venture model, they continue to grow which is allowing them to find success in this model. We are starting to see this model be played out with their newest joint venture with Norton Healthcare that was just finalized in September so we will start to see this partnership grow in the coming months.
LHC Group’s management team is highly qualified to continue to find ways to grow the company and navigate any challenges they are going to be facing from regulators and reforms. The team knows how to ensure that their partnerships provide support to by offsetting any impacts that they might face in the coming months which is primarily coming through the new reform policies and coming election.
What has the stock done lately?
Since reporting earnings on June 30th, LHCG has been staying very consistent and has been trading around $120-$125 up until the end of September. In October, we started to see a correction take place in the overall market we then saw the stock drop to 108.60 at their lowest point being on October 1, 2019. Since then it has been trading around $114 once again. We are still seeing analysts rating LHCG as a buy with a price target of $145. This is partly due to the fact they are still consistent on the growth plan and they are working towards finding ways to decrease their costs without impacting their quality of treatment.
Past Year Performance:
LHCG is up 29.47% since October 2018; throughout the past year, we saw LHCG reach a high of $126.58 on July 31, 2018. We saw their stock price drop from $113.56 to $108.60 due to the overall correction in the market. Since then we see them moving on an upward trend and will be seeing changes in the stock once earnings are released on November 6, 2019.
LHCG Group Inc. is still succeeding by providing patients post-acute care, and management is executing on their plans to help grow the company moving forward. Overall, the company is consistent and grows accordingly to what management is stating. LHCG is still looking to find ways to grow its business through new joint ventures which they believe will help grow their organic top line along with seeing 90% and high in ratings based on patients rating their quality of care.