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Alere Inc (ALR): This Diagnostics Business Could be A Good Play on Shareholder Activism

Healthways, Inc. (NASDAQ:HWAY) is the most expensively valued among the three. At $17 per share, it is worth around $580 million on the market. The market values Healthways at 14.6 times its trailing EBITDA. Healthways is the provider of specific and personalized interventions to help customers improve physical, emotional and their social well-being, operating in North America, Brazil and Australia. Recently, the company has been upgraded to “buy” by Piper Jaffray analyst Sean Wieland, as he thought Healthways could become the leader in the “population health management” industry. He also raised the company’s target price from $11 to $19 per share. He wrote, “Healthways is the domain expert in population health management, yet has less than a 1% market share in this $1 billion per year opportunity.” In the full year 2013, the company expected to generate $710-$750 million in revenue, with the EPS ranging from $0.25 to $0.35 per share.

My Foolish take

If Alere could sell their non-core businesses and bring more cash back, Alere’s balance sheet would be much stronger. Moreover, the company could focus its resources on its core business to drive the company forward. The expected $50-$100 million in annual savings could also affect its bottom line quite positively in the next several years. Indeed, Alere could be considered a buy at its current price.

Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Becton Dickinson.

The article This Diagnostics Business Could be A Good Play on Shareholder Activism originally appeared on Fool.com and is written by Anh HOANG.

Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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