Apollo Medical Holdings Inc (AMEH, Financial) experienced a daily loss of 8.23%, and a 3-month loss of 22.54%. Despite these losses, the company's Earnings Per Share (EPS) stands at 1.06. These figures lead to the question: Is Apollo Medical Holdings significantly undervalued? In this article, we will delve into a comprehensive valuation analysis to answer this question. Read on to discover Apollo Medical Holdings' true worth.
Company Overview
Apollo Medical Holdings Inc is a physician-centric, patient-centered integrated population health management company. The company aims to provide coordinated, outcomes-based medical care in a cost-effective manner. It is particularly focused on providing high-quality medical care, population health management, and care coordination for patients, especially senior patients and those with multiple chronic conditions. The company operates in the healthcare delivery segment.
The company's current stock price is $29.34, significantly lower than its GF Value of $57.96. This discrepancy suggests that Apollo Medical Holdings may be significantly undervalued. Let's delve deeper into the company's financials to understand its true value.
Understanding GF Value
The GF Value is a proprietary valuation model that estimates the intrinsic value of a stock. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow) at which the stock has traded.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
Based on these factors, the GF Value of Apollo Medical Holdings suggests that the stock is significantly undervalued. The company's stock price is likely to fluctuate around the GF Value Line. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Given that Apollo Medical Holdings is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth. Here are some other companies that may deliver higher future returns at reduced risk.
Financial Strength
Assessing the financial strength of a company before investing in its stock is crucial. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage provide a good understanding of a company's financial strength. Apollo Medical Holdings has a cash-to-debt ratio of 1.29, which is better than 59.79% of 654 companies in the Healthcare Providers & Services industry. The overall financial strength of Apollo Medical Holdings is 8 out of 10, indicating strong financial health.
Profitability and Growth
Companies that have consistently shown profitability over the long term offer less risk to investors. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Apollo Medical Holdings has been profitable 4 over the past 10 years. Over the past twelve months, the company had a revenue of $1.30 billion and Earnings Per Share (EPS) of $1.06. Its operating margin is 8.64%, which ranks better than 66.62% of 656 companies in the Healthcare Providers & Services industry. Overall, the profitability of Apollo Medical Holdings is ranked 5 out of 10, indicating fair profitability.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Apollo Medical Holdings is 17.7%, which ranks better than 71.4% of 563 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is 22.4%, which ranks better than 67.38% of 512 companies in the same industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. The WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Apollo Medical Holdings's return on invested capital is 8.75, and its cost of capital is 9.13.
Conclusion
Overall, Apollo Medical Holdings (AMEH, Financial) stock appears to be significantly undervalued. The company's financial condition is strong, and its profitability is fair. Its growth ranks better than 67.38% of 512 companies in the Healthcare Providers & Services industry. To learn more about Apollo Medical Holdings stock, you can check out its 30-Year Financials here.
To find out the high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
