IPC The Hospitalist Company, Inc.

IPC The Hospitalist Company, Inc. (IPCM - Snapshot Report) saw record third quarter results in November as revenue climbed 32% on the strength of the company's acquisition strategy. IPCM has a PEG of only 0.6.

Company Description

IPC operates and manages hospitalist physician group practices throughout the United States. Hospitalists are acute-care physicians, nurse practitioners and physician assistants who focus on a patient's hospital care from the time of admission to discharge and then have no contact with the patient after discharge.

Hospitalists practice exclusively in hospitals and other inpatient facilities, including acute, sub-acute and long-term care facilities.

The company continues with its strategy to acquire practice groups. In 2008, it acquired ten groups in same-markets and in new markets, including the acquisition of Hospitalists of America, which provided an entry into the Southeast Florida market.

On Jan 8, 2009, IPC announced it had acquired the hospitalist practice of Midwest Acute Care Consultants, Inc. (MACC) in St. Louis, Missouri, where the company already has a significant presence. MACC has an annualized volume run-rate of 14,000 patient encounters.

Revenue Jumped 32% in Third Quarter 2008

On Nov 11, IPC reported third quarter earnings that beat Wall Street estimates by 11.11%, or 2 cents per share. Net income was $3.2 million, or 20 cents a share, compared to a loss of $7.3 million, or 65 cents, in the year ago period. Third-quarter 2007 saw a loss of $8.7 million due to a change in the fair value of preferred stock warrant liabilities.

Revenue rose 32% to $63.2 million from $47.8 million. 57% of the increase in the quarter was attributed to growth in same-market areas.

Same-market net revenue climbed 19% and patient encounters increased 14%. The company attributed the increase to a rise in patient encounters from existing hospitalists as well as new hospitalists added through acquisitions or regular hiring.

Patient encounters also increased in the quarter, rising by 27% to 692,000 from 544,000 a year ago.

2008 Guidance

IPC maintained previously announced revenue and earnings per share guidance for full year 2008. Revenue is expected in the range of $254 million to $257 million while earnings per share should be in the range of 85 to 88 cents.

However, given the tough economic environment, the company is forecasting the earnings per share to be at the low end of the range.

Estimates Holding Steady

Given the company's guidance in November, consensus estimates have been holding fairly steady. Fourth quarter estimates fell 1 penny to 24 cents from 25 cents in the last 60 days.

2008 consensus estimates have been at 85 cents, at the low end of the company's guidance range, for the last 2 months. Covering analysts are bullish about 2009, however, expecting earnings growth of 28.02% which translates into EPS of $1.09.

Value Fundamentals

IPC is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 2 out of the last 4 quarters by an average of 1.01%.

The company has a forward P/E of 14.16. Its price-to-book ratio is 2.09. IPC has a solid 1-year return on equity (ROE) of 13.47%.

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