Taking Care

The Company: Scarsdale, New York, National Home Health Care Corp., incorporated in 1983, is a home health-care service provider.

Markets: National provides a wide variety of home health-care services throughout the New York City metropolitan area and Long Island, as well as certain counties in Connecticut. In-home health care is attractive to patients because it allows them to receive treatment in familiar surroundings and to insurance companies because it lowers overall treatment costs. Convenience and cost savings have made home health care a $35 billion business and one of the fastest-growing segments of the health-care industry.

The Sizzle: Many companies in home health care have been aggressively acquiring other companies, consolidating the industry. National made its first acquisition last year by purchasing New England Home Care, nearly doubling its revenues and expanding into Connecticut. Armed with a strong balance sheet and access to additional capital, further acquisitions appear likely. Combined with internal growth, this should continue the company's trend of record sales, net income and earnings per share.

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The Risks: The federal government has discussed making significant changes in the health-care system. Sweeping changes could adversely affect National Home Health Care.

Historical Financial Performance: Income from continuing operations, net income and earnings per share have all nearly tripled since 1994, even as National built and defined its core business. In 1994, the company divested itself of its National HMO subsidiary; earlier this year it completed an initial public offering of 63 percent of its outpatient medical services subsidiary (resulting in a onetime net gain to National of approximately $1 million). These moves, combined with last year's acquisition, should allow National's expert management team to focus on growing the business in coming years.

Projected Financial Performance: The projections in the chart (below, left) are based on current operations and should be looked at with the understanding that long-term estimates are difficult to make because acquisitions are highly likely. We feel a price-earnings ratio of 20 to 25 is reasonable for a growing company in this field.

Steven N. Bronson is president of Barber & Bronson Inc., a brokerage firm in Ft. Lauderdale, Florida. Jeffrey P. Hasse, editor of The Market Monitor, a monthly newsletter dedicated to coverage of small cap stocks, also contributed to this article. The above opinions are those of the authors and not of Entrepreneur. These investment vehicles may not be right for you. Carefully investigate before investing.

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