Company Description

Amedisys provides home health care and hospice services. The home health segment includes physical, occupational, and speech therapy as well as care for chronic conditions and wound care by skilled nurses. The hospice segment operates through a team of nurses, physicians, patient care managers, and social workers, among others.

The company operates more than 300 home health agencies, and approximately 30 hospice agencies, all Medicare-certified. Amedisys is headquartered in Baton Rouge, Louisiana, has over 14,000 employees, and a market cap of $1.3 billion.

Coming Off of a Record Quarter

On July 29 the company reports record net income in its second-quarter earnings announcement. Quarterly net income was $20.4 million up 37% year-over-year from $14.9 million. The record number translated to earnings per share of 76 cents, up 33% from the 57 cents reported in the second quarter of 2007.

Net service revenue came in at $312.7 million, also a record and up 85% since the second quarter of 2007.

Expansion Continues

Amedisys announced the completed acquisition of 6 home health and hospice agencies on Oct 2. The aforementioned agencies are located across Pennsylvania, Maryland, and Delaware and produced $23 million in revenue during the 12-month period prior to June 30.

The announcement also included the acquisition of a home health and hospice agency in Washington. Total revenue for the company was $1.7 million for the 12-month period through the end of August.

Terms were not disclosed and the deals are not expected to impact Amedisys's earnings until 2009, as the company continues to aggressively pursue acquisitions.

Possible Red Flag

A report was released during mid-August that raised some eyebrows and lowered the stock when an independent research company brought up questions about possible accounting issues. The report caused a massive drop in the stock price, but the fundamentals and estimates remain in tact.

Solid Earnings and Fundamentals

The consensus estimates have actually been increasing and are now projecting growth rates in the mid 30%'s for the current quarter, next quarter, and current year. Amedisys is scheduled to announce third-quarter results on Oct 28. The company has reported surprises in each of the past 4 quarterly announcements.

Current-year earnings estimates are currently averaging $3.11 per share, up from $2.72 90 days ago. With a PEG ratio of under 0.8, the company's growth remains fairly priced.

The Chart

Shares of AMED took a steep drop from the 52-week high when the previously mentioned report was released but have maintained decent support since then. The stock is now trading at levels sustained earlier this summer. Keep in mind that stocks near a high point often sell off rapidly in shaky markets as investors look to take any profit they can. Take a look at the chart below.