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Here's Why You Should Retain LHC Group (LHCG) Stock Now

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LHC Group, Inc. is well poised for growth backed by broad array of services and commitment toward inorganic expansion through strategic acquisitions and joint ventures. However, intense competition continues to remain a concern.

Shares of LHC Group have lost 7.9%, compared with the industry’s decline of 5.9% on a year-to-date basis. Meanwhile, the S&P 500 Index fell 10.6% in same timeframe.

The company, with a market capitalization of $4 billion, serves as a post-acute care partner for hospitals, physicians and families in the United States. It anticipates earnings to improve 13% over the next five years. Moreover, it has beat estimates in the trailing four quarters by 8.1%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).




What’s Deterring the Stock?

The home health care market is highly fragmented. Notably, LHC Group faces stiff competition from MedTech bigwigs like Amedisys (AMED - Free Report) and Chemed (CHE - Free Report) , which have greater resources and better access to capital. Even local and regional providers of home health service pose stiff competition.

What’s Favoring the Stock?

LHC Group has been offering a wide array of services through its diverse business segments, which have also been instrumental in driving the top line.

Within home health services arm, nurses, home health aides and therapists work closely with patients and their families to design and implement individualized treatment plans in accordance with a physician-prescribed plan of care. Increased acquisition activities in this space has helped the company gain a competitive edge.

LHC Group has long been focusing on acquisitions and joint ventures for inorganic expansion. From 2019 to so far in 2020, the company acquired 27 home health, 11 hospice and three home and community-based services locations, and one Long Term Acute Care (LTAC) hospital in 13 states and the District of Columbia, the majority of which are hospital joint ventures. These buyouts account for $114.3 million in annualized revenues.

Given the current environment, LHC Group is positioned to exceed the aforementioned annualized revenues in 2020 and 2021, per management.

Which Way are Estimates Headed?

For 2020, the Zacks Consensus Estimate for revenues is pegged at $2.15 billion, indicating an improvement of 3.6% from the year-ago period. The same for earnings stands at $4.70, suggesting growth of 5.2% from the year-ago reported figure.

Stock to Consider

A better-ranked stock from the broader medical space is Accuray Incorporated (ARAY - Free Report) carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Accuray has an expected earnings growth rate of 200% for third-quarter fiscal 2020.

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