An aging population and a recession-resistant business model make Providence Service Corp. (PRSC) a solid investment even in today’s more treacherous market, asserts Mike Larson, growth stock expert and editor of Weiss Rating's Under the Radar Stocks.
All of us are getting older individually; that’s just a fact of life. But what’s notable from a demographic standpoint is that we’re also aging collectively. Consider these facts and projections from the Census Bureau: By 2030, the entire Baby Boomer generation will be at least 65. As a result, one in every five U.S. residents will be of retirement age.
This aging of America certainly is creating challenges for our economy. But it’s also creating opportunities for companies whose business involves helping care for and support our older population. Providence is one such firm. The Atlanta-based company provides non-emergency transportation (NEMT) of patients under the LogistiCare brand name.
Specifically, it works with state governments and managed care companies to organize and oversee transportation for patients who can’t get to and from doctor appointments, healthcare facilities, and/or their own homes.
In other words, Providence operates a recession-resistant business in a recession-resistant sector (healthcare) where demographic developments virtually guarantee growth for several years.
Of course, Providence isn’t just riding that wave. It’s taking prudent steps to maximize its business along the way. Specifically, it just acquired a company called Circulation in September 2018. The move will enhance its logistics, analytics and transportation offerings because Circulation serves roughly 3,000 healthcare facilities in 45 U.S. states.
The company also sold a workforce development business called WD Services in December 2018 for $46.5 million. That will allow Providence to focus entirely on its healthcare-related businesses — a smart strategic move.
All told, after accounting for various restructuring and tax-related items, adjusted net income came in at $10.5 million, or 63 cents per share, in the third quarter of 2018. That was up 69% from $6.2 million, or 33 cents per share, in the year-earlier period. Revenue rose 2.9% on a consolidated basis.
I’m confident Providence can deliver even better results going forward, particularly because the company said recent strategic moves would shave off at least $10 million per year in costs. And right now, Providence shares are trading for around $70 vs. the low-$80s price they were going for back in mid-2018. I recommend you take advantage of that discount.
