Healthways, Inc. HWAY recently completed the previously apprised process for evaluating strategic alternatives to increase shareholders’ value. The board mulled over a variety of options, including an outright sale. However, at the end, management decided that the company will remain independent and public.
Although share price dropped more than 7% following the announcement on Mar 30, it recovered 1.34% (26 cents) to close at $19.70 on Mar 31. We believe the improvement in share price will bring some relief to Healthways management, helping the company focus on its core growth strategies.
Notably, on Jan 25, 2015, Healthways declared the initiation of its strategic review with the help of J.P. Morgan Securities and Bass Berry & Sims as its financial and legal advisors, respectively. Although the strategic review process is no longer active, Healthways will remain open to any deal that enhances its stockholders’ value.
Along with this announcement, Healthways also re-affirmed its guidance for 2015. Currently, revenues are forecasted in the range of $800 million to $825 million. EBITDA margin is forecasted in the range of 10.5% to 11% while adjusted EPS will likely come in between 35 cents and 47 cents.
Healthways expects strong revenue growth in its health system and physicians market and single to low-double digit growth in commercial health plan, international, Medicare Advantage, and direct-to-employer markets for 2015.
Management believes that a growing customer base will help it boost revenues at compound annual growth rate (CAGR) of 10% to 15% over the next three to five years. EBITDA margins are also expected to return to a range of 15% to 18% by the end of that period.
We believe that the recently signed collaboration with MedAssets MDAS, close on the heels of a joint venture with Sul America S.A. and EmblemHealth, and expansion of its long-term relationship with CareFirst BlueCross BlueShield (CareFirst) will help the company to achieve this objective going forward.
Zacks Rank
Currently, Healthways has a Zacks Rank #3 (Hold). Better-ranked stocks in the medical sector are LeMaitre Vascular LMAT and Capricor Therapeutics CAPR. While LeMaitre Vascular sports a Zacks Rank #1 (Strong Buy), Capricor Therapeutics holds a Zacks Rank #2 (Buy).
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