Monday, October 7, 2013

Seeking Alpha: Amedisys Still Facing Significant Headwinds

It has been about a year and a half since I last wrote on Amedisys (AMED). In that time, a lot of the bad news I feared (namely ongoing Medicare pressure) materialized, and the company has struggled to offset weak reimbursement and volume with cost cuts. While my bullish call on the stock has technically worked out (the shares are up about 55% since February 7, 2012), the stock really didn't go anywhere before August of this year and I'm not really calling this a successful pick.

Looking ahead, I see Amedisys broadly the same as I did before, only with a higher valuation. I believe the Street still underestimates the long term potential of this business, but that "potential" has to be set against some very real challenges from reimbursement and in executing additional cost cuts. I'm reasonably confident that Amedisys can improve its margins from here, and I think the KKR investment supports that basic idea, but it's hard to really pound the table for a company that has to always stay a step ahead of government price cuts.

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Amedisys Still Facing Significant Headwinds

1 comment:

HelicalZz said...

Good commentary. Hanging on with AFAM myself, but waiting seemingly forever for the 'growth via acquisition' to play out. Patience beats overpaying though. GTIV's debt level is too scary to consider. With a squeeze on the top line, I'd just as soon go with the best balance sheet.