|Top Percentage Losers -- Thursday, May 13, 2010|
|Company Name (Ticker)||Intra-Day Price||% Loss||52-Week High||52-Week Low|
|Amedisys (Nasdaq: AMED)||$52.30||-7.0%||$64.28||$28.90|
|Allied Nevada (NYSE: ANV)||$20.44||-6.0%||$22.92||$5.69|
|Gentiva (Nasdaq: GTIV)||$28.20||-5.2%||$30.88||$14.50|
|LHC Group (Nasdaq: LHCG)||$35.49||-1.7%||$37.49||$20.69|
|*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 11:10AM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain data.|
Prestige Brands Pushing Hard to Stay in Place
Product managers must often wrestle with how much to spend on advertising to support their products. If you spend too much, then profits could disappoint. And if you underspend, sales may suffer. Management at Prestige Brands (NYSE: PBH) had little choice, as sales for its line of cleaning and personal care products have barely budged in recent years. But heavy spending on ads and promotions in its fiscal fourth quarter (ended in March) more than offset any sales gains the company could conjure. Though sales may have exceeded forecasts by a small , per-share profits slumped badly, roughly 30% below the consensus, to $0.15 a share. Shares, which had been near the 52-week high, are off more than -15% in this morning's trading.
At this point, Prestige Brands is simply a “cash cow” and not a growth stock. So is it a value play on that cash generation? The company is generating $59 million in annual free cash flow, and sports an enterprise value of $693 million. In other words, it is trading for around 12 times free cash flow. That’s twice the multiple typically garnered by mature cash cows. Unless Prestige Brands has some new, as yet unforeseen growth drivers up its sleeves, shares may be overvalued by half, even after today’s sell-off.
Healthcare-waste Scrutiny Weighs on these Companies
Shares of Almost Family (Nasdaq: AFAM), Amedisys (Nasdaq: AMED), and Gentiva (Nasdaq :GTIV) are all off more than -5% this morning on news that lawmakers are looking at their books to see if they unlawfully boosted the number of home visits their staffs made to house-bound patients simply to inflate their Medicare billings. As we saw in the recent healthcare debate, waste and unnecessary spending are big factors behind our unsustainably expensive health care system. If lawmakers conclude that Amedysis, Almost Family, Gentiva and LHC Group (Nasdaq: LHCG) defrauded Medicare, they may be liable to pay back erroneous claims, pay out hefty fines and reduce forward revenue expectations.
Indeed, the bi-partisan group of Senators examining the issue may look to make a lesson out of these four firms. In that vein, you may want to sell your stakes in these companies as the Thursday morning stock drops could just be the beginning. This isn’t likely to have a deep-lasting impact on these businesses, which provide vital services. But shares can easily fall another -10% to -20% as the hearings continue.
Dilution Concerns Pressure Allied Nevada Gold
You can’t blame Allied Nevada Gold (AMEX: ANV) for getting while the getting’s good. The company’s shares have been on a tear since April 28 on the heels of a powerful rally in the price of gold, and management quickly lined up investors on Wednesday to buy almost $300 million of freshly-issued stock. Shares are off more than -5% in Thursday trading in a knee-jerk reaction to dilution fears. But since the stock was issued at an all-time high for this gold exploration firm, the pain of dilution was greatly minimized. Put another way, if the company had raised the capital last fall when gold was first rallying, then the company would have had to issue 26 million shares instead of the 13 million that were actually issued. Investors should also be pleased that the deal was priced just a tick below Wednesday’s closing price.
The fresh cash should enable Allied Nevada to more quickly tap its various gold and silver mines. The company is sitting on more than two million ounces of unmined gold and 32 million ounces of unmined silver. With expectations of further spikes in precious metals prices in the quarters and years to come, an expedited mining approach makes sense.