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					Continucare Corp.                                                                                                  April 9, 2010



                                                            Continucare Corporation
                                                                      (AMEX: CNU)
                                                                           Healthcare: Health Services
                                                                                                               Ema Kulenovic


                                                      Recommendation: Strong Buy
                                                          F-Score of 8
                                                          Healthy margins relative to industry averages
                                                          No issued debt
                                                          Healthy sales growth and cash flows
                                                          Low price multiples compared to industry averages




                1 Year Price Comparison: CNU (Blue) vs. S&P 500 (Green). Yahoo Finance Charts, April 7, 2010



Company Overview1 Continucare Corporation (CNU), established in 1996, provides primary care
physician services on an outpatient basis in the United States. Based in Miami, Florida the company's
two main services include primary care medical services through its network of medical centers and
management services for independent private practice primary care physicians. Despite being a $230
million business, Continucare is one of the largest medical providers in Florida with 18 medical centers
and 21 independent private practice offices.




Page 1                                                                                                  Analyst: Tim Kowalczyk
                                                                Key Statistics1
                                                                Price                   $3.61 (4/15/10)
Continucare Corporation also operates and manages sleep         Market Cap              $216.45M
diagnostic centers at 15 locations in seven different states.   52 Week Range           $1.81 - $5.25
In addition, the company launched Seredor Corporation; in       EPS (ttm)               0.32
August of 2009, with the acquisition of two sleep disorder      Beta                   0.54
facilities. These acquisitions represent a key growth
                                                                Key Ratios1
opportunity for Continucare driven by a medical condition       P/E (ttm)              11.14
known as Obstructive Sleep Apnea (OSA). Over 18 million         P/E (fwd)              11.28
Americans are affected by this breathing disorder while         PEG                    0.60
sleeping and it poses a severe risk if left untreated.          P/S(ttm)                0.74
Continucare's revenue is dominated by "risk" patients.          P/B                    1.77
Over 97% of the company's revenues are derived from             P/S                    0.70
Medicare and Medicaid patients. In addition, 90% comes          P/CF (ttm)             9.50
from Medicare, which will have a favorable long-term
outcome in the healthcare reform bill.

Key Developments2
        4/7/10 – Top 10 Healthcare Facilities with Highest Return on Assets: Continucare is recognized
         among the top 10, with the 8th highest Return on Assets in this segment of the market; Its ROA
         was 15.65% for the last 12 months.
        2/4/10 – Continucare Corporation reports 45% increase in operating income for second quarter
         of fiscal 2010
        1/29/10 – Healthcare Stocks Outperform Benchmarks: ContinuCare soars 22% since December,
         outpacing the Russell 2000, which rose 2% over the same timeframe.
        1/15/2010 – SmarTrend identified an uptrend for Continucare selling at $3.04 on November 9,
         2009. In approximately two months, Continucare has returned 52.3% as of today's recent price
         of $4.63.
        8/13/09 – Continucare Corporation announces acquisition of Professional Sleep Diagnostics,
         Inc., a full service operator of sleep diagnostic centers.
        6/19/09 – Continucare Corporation sets to join Russell 3000®index




Page 2                                                                            Analyst: Ema Kulenovic
Key Drivers                                          Risk Factors
     Constant need for medical care and                     Medicare risk adjustment program – what future impacts
      services                                                will this have on revenue?
     Aging population – 76 million Americans                Operations dependant on contracts with three health
      predicted to turn 65 in 2011                            maintenance organizations – no assurance these
                                                              agreements will remain in effect
     Acquisition of sleep diagnostic centers –
      opportunity for growth                                 Risk agreements - receive fixed monthly payments
                                                              (capitated fee); if medical claims exceed expenses →
                                                              profits decline


      Industry Analysis and Comparison
       Health care services is a $1.5 trillion industry and still growing. It was ranked as one of the largest
      industries in 2008 and has generated some 14.3 million jobs. Healthcare is a defensive industry,
      remaining stable during the various phases of the market. Given both economic upturns and downturns,
      Continucare Corp’s future sales and earnings are expected to remain relatively stable. There is a
      constant demand for medical care and these services are driven by demographics and advancements in
      medical and healthcare technology. A significant influence on demand is that small institutions can still
      compete quite successfully by serving a limited geographical area and offering specialized services. In
      addition, people are living longer and are requiring more medical services than ever. Recently, there
      have been speculations regarding the health care industry given the new health care reform bill. When
      and if the bill passes, it will directly affect current Medicare and Medicaid policies directly impacting the
      health care industry. The bill will not cut traditional Medicare benefits and will actually bolster the
      existing Medicare prescription-drug benefits. What affect the bill will have all depends on the structure
      of the firm and how revenues are generated (government-sponsored health care vs. private insurers).




      Page 3                                                                               Analyst: Ema Kulenovic
  Key Ratios Peer Comparison1

  Ratio                                CNU               MDF                LCAV            Industry Avgs.
  Market Cap                           $218.85M          $126.31M           $154.35M         $67.33M
  Price                                $3.61             $3.17              $8.29                -
  P/E (ttm)                            11.48             10.62                 -             16.87
  P/B                                  1.77              3.36               3.02             1.90
  P/S                                  0.74              0.36               1.19             1.76
  P/CF                                 9.63              8.27                  -             6.29
  EPS                                  0.324             0.315              -1.79            0.08
  Beta                                 0.46              0.81               2.12             0.60
  Oper. Profit Margin                  10.61%            6.48%              -28.24%          8.08%
  5 yr Avg Oper                        6.99%             3.72%              7.01%            8.28%
  Net Profit Margin                    6.53%             4.08%              -25.73%          4.91%
  5 yr Avg Net                         5.42%             2.46%              4.22%            5.18%
  ROA                                  15.65%            28.76%             -24.61%          1.97%
  5 yr ROA                             14.04%            15.36%             5.30             2.17%
  ROE                                  17.35%            33.98%             -49.61%           4.83%
  5 yr ROE                             15.89%            19.21%             8.90%            4.15%
  Total D/E                            0.00%             1.67%              17.92%           54.38%


MDF: Metropolitan Health Networks, Inc., through its subsidiaries, operates provider service networks (PSN) in the
United States. Its PSN provides and arranges healthcare services to Medicare Advantage beneficiaries who
participate in a Medicare Advantage plan. The company offers Medicare, a national health insurance program that
covers the cost of hospitalization, medical care, and related health services for the U.S. citizens aged 65 and older,
qualifying disabled persons, and persons suffering from end-staged renal disease. As of December 31, 2009, the PSN
provided healthcare benefits to approximately 35,500 Medicare advantage beneficiaries. The company was founded
in 1996 and is headquartered in West Palm Beach, Florida.
LCAV: LCA-Vision Inc. provides fixed-site laser vision correction services under the LasikPlus brand. It offers laser
vision correction procedures to correct nearsightedness, farsightedness, and astigmatism. As of December 31, 2009, it
operated 63 LasikPlus fixed-site laser vision correction centers in the United States; and a joint venture in Canada.
The company was founded in 1985 and is and is headquartered in Cincinnati, Ohio.




Page 4                                                                                       Analyst: Ema Kulenovic
         One Year Price chart comparing Continucare Corp, the S&P 500 and Continucare’s major competitors (Google Finance)




Page 5                                                                                                   Analyst: Ema Kulenovic
F Scores 3
F-score uses a series of financial and management indicators to score a company from 0-9, 9
representing a company which is the most financially stable. Continucare Corporation currently receives
an F Score of 8, same as last year.



                ROA +    CF +     ∆ ROA +     Accruals    ∆ TD/TA    ∆ Liquidity   Equity     ∆ Margin +   ∆ TATO +

Current         1        0        1           1           1          1             1          1            1
Previous        1        0        1           1           1          1             1          1            1



1
    Yahoo Finance
2
    Reuters
3
 Piotroski, Joseph D.Value Investing: The Use of Historical Financial Statement Information to Separate Winners
from Losers Journal of Accounting Research, Vol. 38, Supplement: Studies on Accounting Information and the
Economics of the Firm. (2000), pp. 1-41.




Page 6                                                                                      Analyst: Ema Kulenovic

				
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