Apollo Medical Holdings Inc (NASDAQ:AMEH), a US$677.84m small-cap, operates in the healthcare industry, which faces key trends such as rising demand fuelled by an aging population and the growing prevalence of chronic diseases. Moreover, healthcare providers are faced with particularly difficult and interdependent challenges. A focus towards more collaborative and data-driven care models, which address behavioural and physical health of chronic illness or aging patients, may help improve patient outcomes and lowered costs. Healthcare analysts are forecasting for the entire industry, a strong double-digit growth of 12.26% in the upcoming year , and a whopping growth of 37.15% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Is now the right time to pick up some shares in healthcare providers? In this article, I’ll take you through the sector growth expectations, and also determine whether Apollo Medical Holdings is a laggard or leader relative to its healthcare sector peers.
What’s the catalyst for Apollo Medical Holdings’s sector growth?
Providers that are finding it harder to profit from further cost and operational efficiencies after picking the low-hanging fruit are beginning to turn their attention to more transformative initiatives to bend the cost curve. In the past year, the industry delivered growth in the teens, though still underperforming the wider US stock market. Apollo Medical Holdings leads the pack with its impressive earnings growth of over 100% last year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -43.77% compared to the wider healthcare provider sector growth hovering in the teens next year. This growth is a median of profitable companies of 24 Healthcare companies in US including Cross Country Healthcare, Providence Service and Patterson Companies. As a future industry laggard in growth, Apollo Medical Holdings may be a cheaper stock relative to its peers.
Is Apollo Medical Holdings and the sector relatively cheap?
The healthcare sector’s PE is currently hovering around 23.92x, higher than the rest of the US stock market PE of 18.08x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 14.37% compared to the market’s 11.40%, which may be indicative of past tailwinds. On the stock-level, Apollo Medical Holdings is trading at a PE ratio of 24.41x, which is relatively in-line with the average healthcare provider stock. In terms of returns, Apollo Medical Holdings generated 15.19% in the past year, in-line with its industry average.
If Apollo Medical Holdings has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a healthcare provider industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the healthcare sector. However, before you make a decision on the stock, I suggest you look at Apollo Medical Holdings’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has AMEH’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Apollo Medical Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.