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Here's Why You Should Add Amedisys (AMED) to Your Portfolio

Zacks Equity Research logoZacks Equity Research 8/21/2018 Zacks Equity Research

Amedisys, Inc. AMED has been gaining investor confidence on consistently positive results. Over the past six months, the company’s share price has outperformed its industry. The stock has gained 109.5% compared with 20.8% growth recorded by the industry. Also, the company has outperformed the S&P 500’s 5.5% increase.

This renowned home health and hospice services provider has a market cap of $3.80 billion. The company’s five-year projected growth rate is favorable at 18.6% compared with the industry’s 13.8%.

With solid prospects, this Zacks Rank #1 (Strong Buy) stock is an attractive pick for investors at the moment.

The company’s estimate revision trend for the current year has been positive. In the past 30 days, seven analysts revised their estimates upward, with no movement in the opposite direction. Resultantly, earnings estimates rose around 3% to $3.13 per share.

Per our Style Score, Amedisys sports a Growth Score of A, which is reflective of the company’s solid prospects. Our research shows that stocks with a Growth Style Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.

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Let’s find out whether the positive trend is a sustainable one.

Opportunities in Home Health and Hospice Galore

In November 2017, Centers for Medicare and Medicaid Services (CMS) issued a final rule to update and revise the 2018 Medicare home health reimbursement rates without finalizing the Home Health Groupings Model (HHGM) which was proposed to be implemented in 2019. With this, CMS projects a decline of 0.4% in reimbursement to home health providers resulting from the payment provisions of the final rule.

According to home health players like Amedisys, HHGM happens to be one of the most significant regulatory proposals and has the potential to mutilate the industry. Amedisys is currently leaving no stone unturned to take advantage of this situation. It is striving to improve the quality of care as well as implement disease management programs at hospitals. The company is also working on expanding its business by garnering more referrals from hospitals.

Favorable 2018 Home Health Final Rule

According to a report by HEALTHCAREfirst, the decision on 2018 Home Health Final Rule was taken without the implementation of the Home Health Groupings Model (HHGM) scheduled for rollout in 2019. Amedisys is optimistic about the implementation of this rule and expects this to positively impact the business in the future.

Favorable Demographic Trends

The home health industry is poised for tremendous growth, courtesy of an aging U.S. population, patients’ desire for independence and home health as a cheaper care modality. The company should continue to benefit from the aging demographics of the U.S. population and the need for higher acuity patients to be taken care of in a home nursing environment.

Other Key Picks

Other top-ranked stocks in the broader medical space are Integer Holdings Corporation ITGR, Intuitive Surgical ISRG and Masimo Corporation MASI.

Integer Holdings’ expected long-term earnings growth rate is 15%. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock carries a Zacks Rank #2.

Masimo’s long-term expected earnings growth rate is 14.8%. The stock has a Zacks Rank #2.

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