- By GF Value
The stock of Amedisys (NAS:AMED, 30-year Financials) appears to be significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $283.09 per share and the market cap of $9.3 billion, Amedisys stock appears to be significantly overvalued. GF Value for Amedisys is shown in the chart below.
Because Amedisys is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 12.2% over the past three years and is estimated to grow 8.52% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Amedisys has a cash-to-debt ratio of 0.27, which is worse than 69% of the companies in the industry of Healthcare Providers & Services. The overall financial strength of Amedisys is 7 out of 10, which indicates that the financial strength of Amedisys is fair. This is the debt and cash of Amedisys over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Amedisys has been profitable 6 over the past 10 years. Over the past twelve months, the company had a revenue of $2.1 billion and earnings of $5.52 a share. Its operating margin is 10.79%, which ranks better than 74% of the companies in the industry of Healthcare Providers & Services. Overall, GuruFocus ranks the profitability of Amedisys at 6 out of 10, which indicates fair profitability. This is the revenue and net income of Amedisys over the past years: