Addus HomeCare (ADUS) is one of the fastest growing public home care companies in the country; it provides personal care services to elderly, chronically ill, and disabled persons, explains Doug Gerlach, editor of SmallCap Informer.

These services allow clients to avoid or delay hospital stays and remain in their homes for longer periods, easing volume pressures on large healthcare systems and providing lower costs of care that both insurers/payors and individuals appreciate.

Addus HomeCare was founded in 1979 and is based in Frisco, Texas. In recent years, Addus has followed shifts in its industry and migrated towards serving managed care providers and major healthcare systems. The company serves around 45,000 consumers through 211 offices located in 22 states.

Since 2012, revenues have grown 15.5% a year on average to reach $864.5 million in 2021. In the same period, EPS grew 12.4%. Since 2017, EPS have expanded more than 24% a year on average.

Management’s stated goal is to realize at least 10% annualized revenue growth. We see EPS growth over the long-term of 15% based on 13% revenue growth on average annually over the next five years. Analysts are currently expecting faster growth in the next two years, so near-term results could be even better.

Addus HomeCare’s P/E ratios have been rising, and have reached very high levels in the 50s in recent years. But the P/E is currently 30.4, 80.9% of its average P/E of the last five years. While we don’t expect those very high P/Es to return, we do think the company can support a P/E of 30, which indicates a future high price of $169.

As a defensive play in an uneasy economy, we think Addus could be a good strategic investment now and an even better opportunity if the price declines as part of a broad market adjustment.

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