Almost Family Worth A Look

By Chris Gallant | June 16, 2010 AAA

With the past several years of uncertain economic conditions, many seemingly attractive industries and companies have lost their former luster. Healthcare, however, is one area of the economy that generally performs well in good and bad times alike. As well, the continued aging of the American population means that healthcare will certainly continue to play a critical role in future economic activity. (For a quick refresher on this subject, check out Investing In The Healthcare Sector.)

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Almost Family
Almost Family
(Nasdaq:AFAM) specializes in serving the personal healthcare needs of elderly patients. Founded in 1985 and based in Louisville, KY, Almost Family operates two primary business lines. The Visiting Nurse segment provides in-home nursing services to patients in need of medical care, typically following hospitalization or other initial treatment. The Personal Care segment provides home-care services such as medication management, meal preparation and caregiver respite.

Almost Perfect Earnings
Despite the rough economic conditions of the past several years, Almost Family hasn't missed a beat. The company more than doubled its top line of $132.1 million from 2007 to a hearty $297.8 million for its fiscal 2009. During this same period of time, its net income more than tripled, growing from $7.6 million in 2007 to an impressive $24.6 million for 2009. This positive is widely expected to continue, with analysts currently estimating the company's full-year 2010 sales to register between $332 and $351 million, representing an expected increase of between 11.5% and 17.9%.

Undervalued Relative to Peers
Despite such strong historical performance, Almost Family remains underpriced on a trailing basis against several of its competitors. Gentiva Health Services (Nasdaq:GTIV) carries a trailing P/E ratio of 16.6 and National Healthcare's (NYSE:NHC) is 14.6, while Almost Family is currently priced with a P/E of 12.4. While Amedisys (Nasdaq:AMED) carries an even lower trailing P/E of 9.1, it also carries a lot more debt than Almost Family and can arguably have a risk premium baked into its valuation as a result.

Rock Solid Balance Sheet
Speaking of low debt, Almost Family has taken strides to improve its balance sheet from good to great shape in recent years. The company carried $27.2 million in long-term debt at its 2008 year-end, but only $1.3 million in long-term debt remains as of its first-quarter 2010 balance sheet.

The company currently has enough cash on hand to cover nearly all of its long-term debt and current liabilities combined. And it has managed to increase its total shareholder equity by an outstanding 46.1% during the trailing twelve months reported.

The Bottom Line
Almost Family operates in a stable industry with a bright outlook. It has put up consistently strong and improving financial results for several years running, and has a pristine balance sheet. Despite these advantages, Almost Family trades at a significant discount to its peers and is likely to represent a good buying opportunity for bargain-hunting value investors. (For related reading, check out Demographic Trends And The Implications For Investment.)

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