Play the Healthcare Mega-Trend With EVHC Stock

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In case you missed it, the news was abuzz late last month thanks to perky health care spending. According to the most recent federal estimates, healthcare spending grew 5.5% last year, tallying a whopping $3.1 trillion, or just under $10,000 per person.

envision-healthcare-evhc-stock-logo-185That represents a clear recovery from the Great Recession. In fact, it’s the first time the rate has topped 5% since 2007. For the cherry on top, health spending growth is expected to average 5.8% per year over the next decade.

If they haven’t already, investors should take note. One of the lower-risk ways to play the healthcare mega-trends is with medical services stocks. A prime example: Envision Healthcare Holdings (EVHC).

First, the basics: Envsion Healthcare operates under three brands: American Medical Response (AMR), EmCare and Evolution Health. Those brands offer healthcare-related services to consumers, hospitals, healthcare systems, health plans and local, state and national government entities.

Considering the aforementioned mega-trend behind EVHC, it should be no surprise that the stock has been chugging higher since it hit the public markets in late 2013. Shares were originally priced at $23 per share and are now trading for nearly double that.

And in 2015 alone, shares have posted a 29% climb. Remember, the broader S&P 500 has gained around 2% over the same time period.

A quick sample of the company’s most recent earnings report comes with 26% sales growth — driven from the trifecta of acquisitions, net new contract wins and same-store growth. That helped the company post net income of $52.4 million — far better than its net loss of $2 million the year prior — along with 32% growth in earnings per share.

Speaking of acquisitions, since that report, Envision snatched up Rural/Metro Corporation via its aforementioned American Medical Response segment, which focuses on medical transportation. That brings another mega-trend into the mix: mobile delivery. According to the news release, “Rural/Metro is expected to generate annualized 2015 revenue of approximately $600 million. Upon closing, the transaction is expected to be accretive to Envision’s earnings.”

Add it all up, and it’s almost no wonder investors have been bidding EVHC stock steadily higher since it went public.

Of course, there is always a catch-22 to such stock gains: EVHC is looking slightly frothy since and is quickly nearing consensus analyst price target.

But such targets always take a bit to catch up to momentum. With EVHC making higher lows and higher highs and recently breaking out from its 50-day moving average, there’s reason to think the rising tide will keep the ship afloat much longer.

There are lots of other healthcare stocks to consider, of course. But medical services stocks are a great way to play this rise in spending, and Envision Healthcare has already proven its one of the best in that pack.

Hilary Kramer is the editor of GameChangersBreakout Stocks Under $10High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/play-the-healthcare-mega-trend-with-evhc-stock/.

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