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.
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