Should You Follow Coliseum Capital And Other Investors Out Of This Stock?

A provider of post-acute health care services, LHC Group, Inc. (NASDAQ:LHCG) has seen its stock steadily rise since the start of 2012, with the price quadrupling by mid-August of this year, before suffering a minor correction amid the recent selloff. Yesterday’s closing price of $46.04 gives the company a market cap of $826 million and a Price-to-Earnings (P/E) ratio of 29.xx, roughly half the sector’s average P/E of 54.47. During the second quarter of 2015, LHC Group, Inc. (NASDAQ:LHCG) managed to increase its revenues by 5.98% year-over-year to $200 million, while earnings jumped to $0.51 per share. On September 1, Wells Fargo initiated coverage on the company, assigning an ‘Outperform’ rating to the stock, while analysts from Oppenheimer and Piper Jaffray reaffirmed their bullish stances in August.

On September 3, LHC Group, Inc. (NASDAQ:LHCG) announced a definitive agreement to acquire Halcyon Hospice LLC, a provider of hospice services with a strong presence in the southeastern United States, in a deal worth $58.5 million. The deal is also expected to bring LHC Group estimated cash tax savings of $7 million over the next 15 years, thus reducing the takeover bill to $51.5 million. Halcyon Hospice has registered average annual revenues of $41 million and is expected to boost LHC Group’s earnings by $0.15-to-$0.20 per share in 2016, while 2015 fourth quarter earnings are expected to take a hit due to takeover and integration costs. Following this deal, LHC Group, Inc. (NASDAQ:LHCG) has reassessed its full year forward guidance, raising expected revenues to a range of $800 million-to-$815 million, from the previous range of $780 million-to-$795 million, and has reaffirmed its earnings expectations of $1.70-to-$1.80 for 2015.

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