MEDNAX Inc. MD is well-poised for growth on healthy revenue stream and strategic initiatives.
Its VGM Score of A is also impressive. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Now let’s see what makes this stock an investor favorite.
The company has been witnessing strong revenue growth over the past many years, riding high on operational efficiency, inorganic growth, etc. MEDNAX saw a CAGR of 12.3% between 2012 and 2018. In the first nine months of 2019, the company’s top line rose 1.6% year over year. We expect MEDNAX to witness revenue growth in the coming quarters on strategic initiatives.
Acquisitions and divestitures have been constantly contributing to the company’s growth. Significant buyouts — including that of vRad in 2015 — have helped it expand services in telemedicine. In 2018, the company acquired nine physician group practices. Following the trend, in the first nine months of 2019, MEDNAX closed buyouts of two neonatology physician practices, two maternal-fetal medicine physician practices and two other pediatric subspecialty practices. It expects to close purchases in radiology in the upcoming quarters.
In October 2019, MEDNAX divested its MedData business to Frazier Healthcare Partners. The divestment is expected to position the company in a better way, both financially and strategically, and help it focus on the core business. The transaction will likely help it pay down debt.
However, MEDNAX is grappling with elevated expense levels for the past many years. Though the company has undertaken cost-curbing initiatives, high labor costs should keep exerting upward pressure on salaries and the benefit component of total expenses. An increase in expenses might weigh on its margins.
In the past year, shares of this Zacks Rank #3 (Hold) company have shed 35.5%, wider than its industry's decline of 4%.
Stocks to Consider
Investors interested in the medical sector might consider some better-ranked stocks like Select Medical Holdings Corporation SEM, WellCare Health Plans, Inc WCG and Genesis Healthcare, Inc GEN.
Select Medical operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics and occupational health centers. For the trailing four quarters, the company has an earnings beat of 11.1%, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
WellCare Health offers managed care services to government-sponsored health care programs. The company has a positive surprise of 17.3%, on average, for the preceding four quarters. It currently carries a Zacks Rank #2 (Buy).
Genesis Healthcare operates skilled nursing facilities and assisted living centers. For the last four quarters, the company has an earnings beat of 80.9%, on average. It presently flaunts a Zacks Rank of 1.
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