OPPORTUNITY TO CONSIDER
The 40 day post-IPO quiet period on Envision Healthcare Holdings, Inc. (NYSE:EVHC) comes to an end on September 22, which could lead to a positive upturn for the stock as the underwriters set to release positive research reports. The EVHC IPO featured several high-visibility underwriters including Goldman Sachs (NYSE:GS), Barclays (NYSE:BCS), BofA Merrill Lynch (NYSE:BAC) and Citigroup (NYSE:C), all of which may release a flood of positive information surrounding EVHC on Monday as the quiet period ends.
Our studies and academic statistical research indicate that there is a correlation between the number of underwriters and the size of the increase in stock price caused by the ending of the quiet period.
The increase in price will likely begin late this week in the run-up to the end of the quiet period, rather than after the underwriters have released their reports. As more investment advisers and academics have become familiar with and published about the phenomenon of rising stock prices at the expiration of quiet periods, more investors have followed their lead and begun purchasing before the actual release of the positive research reports. This produces a self-reinforcing cycle: as investors buy in advance of the release of research, they drive the price up, leading other investors to start buying. By the time the quiet period ends and underwriters actually get their research into the hands of investors, it's more or less a cherry on top of an already-rising price.
Envision Healthcare (which had been known as CDRT Holding Corporation until June of 2013) is a provider of outsourced medical services based in Greenwood Village, Colorado. The firm divides its services into two brands: EmCare, which employs some 8000 clinicians for facility-based services, and AMR, which employs over 12000 paramedics and EMTs to provide and manage medical transportation services.
EVHC generated approximately $3.3 billion in revenues for the year ended on December 31, 2012. The company has developed a large customer base; as of December 31, 2012, EmCare had contracts with 604 clinical departments, and AMR had 169 "9-1-1" contracts along with 3,169 non-emergency transportation deals. During 2012, the company reported 13.3 million patient encounters across the United States.
EVHC provides what amounts to a cost-saving service to communities and facilities that cannot afford to maintain certain types of medical services in-house. Offering piecemeal services allows EVHC to provide communities with the services they require with little or no frills. The widespread rise in medical costs across the United States has squeezed healthcare providers and has provided a growing market for EVHC to inhabit; likewise, the recent increase in media attention on the inefficiencies of the American healthcare system will help investors to understand the potential of a firm like EVHC.
The passage of the Patient Protection and Affordable Care Act is expected to pressure traditional healthcare systems and to increase overall insurance coverage among patients. These factors will both play in the favor of EVHC, which will no doubt be called upon to fill in the gaps for facilities that will suddenly be faced with a population much more willing to seek medical care.
Medical outsourcing is a highly competitive field, and though EVHC is amongst the largest providers, it hardly has a stranglehold on the market. EmCare must compete with firms like Team Health (NYSE:TMH), Hospital Physician Partners, The Schumacher Group, California Emergency Physicians, and many others. AMR similarly must compete with firms including Acadian Ambulance, Rural/Metro Corporation, and Southwest Ambulance.
The EVHC executive team is promisingly stable - the officers discussed below all have been with the company for over ten years - and highly experienced in the field of contract medical care. CEO William Sanger, has 37 years of industry experience; COO/CFO Randel Owen has 30 years of industry experience; EmCare CEO Todd Zimmerman, EmCare's Chief Executive Officer and an executive vice president, has 22 years of industry experience.
Disclosure: I am long EVHC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article was written for informational purposes. Investors should read the company's recent S-1 and consult with their investment adviser before making any investments.