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6 Home Health Care Stocks to Watch

NEW YORK ( TheStreet) -- Based on the strong industry outlook, latest quarterly results and analysts' hold recommendations, these six home health care stocks have potential upsides ranging from 13% to 60%. On average, these stocks have buy recommendation of 28% and hold rating of 67%, based on a Bloomberg consensus.

These stocks are listed in ascending order of upside potential. Upside is implied by average analysts' price targets.

6. Chemed (CHE - Get Report) operates through two segments: VITAS Group and the Roto-Rooter Group. VITAS focuses on hospice care for terminally ill patients, while Roto-Rooter provides plumbing and drain-cleaning services to both residential and commercial customers.

For the second quarter of 2011, the company reported a 5.8% increase in revenue to $333 million, with the VITAS segment generating a revenue increase of 7.3%. The GAAP diluted earnings per share soared 14.6%, to 94 cents, during the quarter. Net income expanded to $20.3 million from $18.9 million in the second quarter of 2010. Net cash from operating activities doubled to $51.1 million from $20.3 million in the year-ago quarter.

The company recently raised its quarterly dividend to 16 cents per share, up 14.3% from 14 cents paid in the second quarter of 2011. For full year, the company expects revenue growth of 7.5% to 8.5% in VITAS and 6.5% to 8.5% in Roto-Rooter.

EPS, excluding non-cash expense for stock options, non-cash interest expense related to accounting for convertible debt and other items not indicative of ongoing operations, is estimated at $4.7 to $4.8, compared to adjusted earnings per diluted share of $4.17 in 2010.

Of the seven analysts covering the stock, two recommend a buy and three suggest a hold. Data from Bloomberg has analysts forecasting the stock gaining 13.2%, to $65.33, in the upcoming 12 months.

Note: Upside is implied by average analysts price target.
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AFAM $39.70 1.50%
AMED $38.05 3.57%
CHE $131.42 0.77%
GTIV $19.19 -1.18%
LHCG $43.52 0.62%


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