Launch of its cover on Amedisys (NASDAQ: AMED) and Addus HomeCare (ADUS), Stifel had mixed views on the two home health care companies after the Centers for Medicare and Medicaid Services (CMS) proposed Medicare home rate reductions last week.
Issuing a buy rating on Addus (ADUS), analyst Tao Qiu argued that with limited exposure to rate cuts, the company could support stable teenage margin and EBITDA growth as strong state and local reimbursement offset labor inflation.
However, Medicare’s proposed rate cuts, if implemented, could hurt Amedisys (AMED), the analyst pointed out, citing a negative impact on organic growth and margin.
The company highlights the experience of both management teams and argues that both companies are attractive based on their trading multiples to 2023 EBITDA.
However, Qiu, with a Hold on Amedisys (AMED) rating, cited the redemption overrun and limited near-term catalysts for the business, adding “a better buying opportunity can be had when the final rule is released in november”.
The analyst estimates targets of $101 and $128 per share for Addus (ADUS) and Amedisys (AMED), implying a premium of around 22% and a decline of around 8% at the last close, respectively.
Amedisys (AMED) underperformed Addus (ADUS) in 2022, as this chart shows.