By midafternoon, shares had surged 31.5% to $37.20. Trading volume of 672K was more than seven times its three-month daily average.
The social services provider said it had entered into an agreement to purchase Australia-based Ingeus, a company specializing in which provides assistance to the unemployed.
"The acquisition expands Providence's footprint into new markets, diversifies its customer base, and enhances its workforce development expertise," Providence said in a statement.
The Tuscon, Arizona-based will purchase 100% of Ingeus for 35 million British pounds in cash or stock (or $58 million based on the exchange rate at March 27).
The transaction is expected to close in the second quarter of 2014, subject to regulatory approval, and is forecast to be accretive to earnings in the current fiscal year.
"Ingeus complements our existing businesses, both strategically and culturally, and shares our core values, focus on integrity, and commitment to customer-centered care through innovation," said Providence CEO Warren Rustand in a statement. "Importantly, because there is no overlap of current clients, there will be significant opportunity for sharing of expertise."
Ingeus' founder Therese Rein will continue in her role as chief executive, reporting directly to Rustand.
TheStreet Ratings team rates PROVIDENCE SERVICE CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PROVIDENCE SERVICE CORP (PRSC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 54.00% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PRSC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- PROVIDENCE SERVICE CORP has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, PROVIDENCE SERVICE CORP increased its bottom line by earning $1.41 versus $0.65 in the prior year. This year, the market expects an improvement in earnings ($1.60 versus $1.41).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Health Care Providers & Services industry average. The net income increased by 17.2% when compared to the same quarter one year prior, going from $2.87 million to $3.36 million.
- The debt-to-equity ratio is somewhat low, currently at 0.86, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.10, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 275.31% to $9.58 million when compared to the same quarter last year. In addition, PROVIDENCE SERVICE CORP has also vastly surpassed the industry average cash flow growth rate of -26.50%.
- You can view the full analysis from the report here: PRSC Ratings Report