Nate Pile, editor of Nate's Notes, selected Catasys (CATS) as his top investment idea for 2019. The stock has since risen 105%. Here's his latest update on the health services provider.
Catasys was first added to our newsletter last September, and thanks to a combination of how both the company and the stock were performing at the time, it was submitted as our Top Pick for 2019 at the beginning of the year.
Catasys is a small (market cap is right around $300M), up-and-coming company that has developed a proprietary data analysis platform that is combined with predictive modeling techniques to identify individuals in a healthcare plan who suffer from chronic conditions.
But because they may not be receiving the support they need to successfully manage these underlying conditions, end up also costing the plan a great deal of money on other “secondary” items like ambulance transports and visits to the ER that can be prevented (or minimized) with even a small increase in the amount of support that is provided to the patient.
Once individuals in a plan have been identified as good candidates for success, Catasys’ OnTrak program kicks in and a 52-week intensive outpatient program begins.
Patients are then engaged and provided with nurses or coaches — in person and via video conferencing — and these coaches proactively work with their patients to gain better control of their underlying conditions (which, in turn, often leads to fewer “secondary” events in the patients’ lives).
And, while this field is admittedly heating up in a hurry as more and more health records become digitized, Catasys is one of the companies that is enjoying “first to market” status, and, provided they are able to continue delivering the sorts of results that have been delivered so far, they ought to be able to stay ahead of the competition for the foreseeable future.
Not only has Catasys continued to show strong growth in the first half of 2019, thanks to the success it has been achieving with early adopters of their program, many of these health plans are now looking to expand their utilization of Catasys’ programs within their own networks, and, as word continues to spread in the industry, new customers are starting to line up as well.
Though the company will need to be careful to not grow so quickly that the quality of its products begin to suffer, as long as management remains disciplined in its approach to scaling-up the business to handle larger and larger patient pools, we believe all signs are currently pointing towards the company being on the verge of entering a period of “hyper-growth.”
With so few analysts currently following the story (and an extremely thin float, so expect to see some volatility if you get involved with the stock!), we believe there is still plenty of upside left from current prices, especially for investors who are willing to follow our lead by taking a multi-year approach to building a position in the stock. CATS is a buy under $22 and a strong buy below $14.
