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The aging U.S. population is set to double by 2050, increasing the need for caregivers. Addus HomeCare Corporation, based in Frisco, Texas, provides essential personal care, hospice, and home health services. With a market cap of $2.35 billion, Addus reported $1.115 billion in revenue in June 2024, with a 27% profit increase. The company is debt-free and has major shareholders like Blackrock and The Vanguard Group. EPS is forecasted to grow significantly by December 2025. With a growing need for home healthcare services, the company is well-positioned to expand its customer base and market presence.

Company Overview
Addus HomeCare Corporation and its subsidiaries offer personal care services for the elderly, disabled, and those at risk of hospitalization in the U.S. It operates in three areas: Personal Care, Hospice, and Home Health. The Personal Care segment helps with daily activities like bathing, grooming, and meal preparation. The Hospice segment provides care and support for terminally ill patients and their families. The Home Health segment delivers skilled nursing and therapy services for those recovering from illness or hospitalization. Its clients include government agencies, managed care organizations, insurers, and private individuals. Founded in 1979, Addus is based in Frisco, Texas.

Investment Advice by Naranj Capital

Buy Addus Homecare Corporation
ADUS

● Buy Range- 120 - 125
● Target- 150 - 160
● Potential Return- 25-30%
● Duration- 10 -12 Months

Market Capitalization - $ 2.35B
Sector - Healthcare (Nursing)

Technical Analysis
● The monthly chart indicates a clear upward trend in prices.
● Earlier, the stock peaked near the 129 (128.8 to be precise) level before experiencing a correction, which was subsequently followed by an elongated consolidation period from November 2020 to July 2024.
● Recently, the stock has successfully made a multi-year breakout of the previous resistance zone and has maintained its position above this breakout level.
● We expect this momentum to persist, leading to further price increases in the days ahead.

Entry, Exit & Stop-loss

● Entry with Capital allocation strategy
(1) consider adding 50% of your desired quantity at the current market price (132 - 133).
(2) The second buying opportunity will be in the 120 - 122 range, where you can also add rest 50% of your quantity.

● Target
Chart analysis indicates a promising upside potential of 25-30% for this stock from the best buying level, with a target around the 155 to 160. There is also a strong likelihood that the stock could exceed this target.

● Stoploss
It is crucial to implement a strict stop-loss below the 115 level, as we anticipate that the stock may encounter challenges if it drops to this point.

Revenue Breakdown

The company generates its revenue through three primary segments.
(1) The personal care sector represents around 74.2% of the overall revenue, totaling $827 million out of $1.11 billion.
(2) Meanwhile, hospice services contribute nearly 19.7%, amounting to $219.8 million of the total revenue.
(3) The home health segment accounts for approximately 6.1%, which translates to $67.8 million of the overall revenue.

Sales & Profit Analysis

● A noticeable rise in revenue has been observed. For the June quarter, revenue reached $1.115 billion, marking an 11.6% increase from $999 million in June 2023 (YoY) and a 2.5% rise from $1.08 billion in March 2024 (QoQ).
● Additionally, profits surged by 27% in the latest quarter, climbing to $68.89 million from $53.83 million in the same quarter last year, and up 5% from $65.67 million in March 2024.
● The profit margin has also improved, increasing from 5.4% to 6.2% year-on-year.
● The basic EPS for the June 2024 quarter is reported at 4.28, marking a significant increase of 27% from 3.37 in the same quarter last year.

Peer Companies
(1) Privia Health Group (NASDAQ: PRVA) - $ 2.41B PRVA
(2) Amedisys (NASDAQ: AMED) - $ 3.21B AMED
(3) Astrana Health (NASDAQ: ASTH) - $ 2.33B ASTH

Valuation

● P/E vs Fair P/E Ratio

➖ The current PE ratio stands at 34.1x, slightly expensive to the estimated Fair PE of 28.7x.

● P/E Ratio vs Peers

➖ ADUS offers great value with a Price-To-Earnings Ratio of 34.1x, significantly lower than the peer average of 62.7x.

● P/E Ratio vs Industry P/E

➖ ADUS seems to come at a higher price, boasting a Price-To-Earnings Ratio of 34.1x, notably surpassing the US Healthcare industry average of 26.2x.

Debt Analysis

➖ ADUS stands proudly as a debt-free entity, a remarkable transformation from five years ago when its debt to equity ratio stood at 12.9%. This significant shift underscores the company's commitment to financial health and stability.

Top Shareholders

● Blackrock currently holds a substantial 16% stake in this stock, reflecting an impressive increase of 11.2% since the March quarter.
● Meanwhile, The Vanguard Group has also boosted its investment, raising its stake by 8.5% from the previous quarter, bringing their total holding to 7.74%.

Earnings per Share Growth Forecasts

Experts forecast that the earnings per share (EPS) could increase from $4.28 to $4.51 by December 2024, and further rise to $5.03 by December 2025.

Conclusion
With the growing need for home healthcare services, the company is well-positioned to broaden its customer base and enhance its market presence.