March 28, 2008 - Amedisys, Inc. (AMED-NASDAQ): Because the last thing you want to do when you're sick is drive to a doctor's office, Amedisys has decided to bring health care to you. The company's home health care segment comprises skilled nursing and home health aide services, as well as programs focused on disease management including diabetes, wound care, and geriatric surgical recovery. Amedisys also provides terminal illness hospice care and therapy staffing services. The company operates through more than 250 agencies and facilities offices located in nearly 20 states. The company derives more than 90% of its revenues from Medicare reimbursements.

Earnings are moving up as well. In 2005, they were $1.41, then $1.72, followed by $2.32 in 2007. Analysts expect $2.60 this year and $3.15 next year. Over the next 5 years, they forecast sales to grow by 13% a year, on average, while earnings increase by 14.5% a year, on average.

Here's a company servicing one of the greatest needs in the U.S.: the baby boomers' medical concerns. Demographics are very much in AMED's favor as the aging of America continues at a rapid rate. The potential market for its services is literally growing every day.

To help keep up with the growth, AMED is buying other companies. Most recently it agreed to acquire TLC Health Care Services for about $400 million using cash and available debt facilities (usually bank lines of credit). That should complete by the end of the second quarter. Analysts think the new addition will add to profits in 2009. Another purchase was a home health agency in Puerto Rico, its first foray into that market, expanding the company's geographic reach.

Of course, with new acquisitions come integration costs along with closing costs on each transaction. Combined, they will hurt margins in the short run. However, after they've been absorbed, better efficiencies should prevail and margins should expand beyond current levels. With the population continuing to age, AMED will no doubt be adding more companies as it tries to keep up with demand. That will initially be felt on the bottom line. But then each will make a contribution as it is integrated into the parent.

More numbers: Debt is only 3% of capital. Return on Equity is a respectable 17%. There is no dividend. Officers and directors own about 4.4% of the stock. Net profit margin is 8%. The stock recently hit an all-time high (split adjusted) of $50. It's down about 20% since then. Current assets are 1.6 times current liabilities.

This company has a lot of good going for it. Management has been delivering on shareholders' investments with strong return on equity, showing meaningful earnings' growth. Demographics suggest there is plenty of opportunity for more of the same and possibly better results. It's still a rather small firm and that usually means more volatility. In 2003, you could have bought all the stock you wanted at $3.10 a share (split adjusted).

- Company Web site: www.amedisys.com

- Ted Allrich