WebMD Health Corp. (NASDAQ:WBMD) shares were down nearly 30% this morning after the company said it has ended its search for a buyer. The company also said that CEO Wayne Gattinella has resigned; CFO Anthony Vuolo is taking over on an interim basis. WebMD has started a search for a permanent successor. And it issued weak guidance for 2012.
To see a rather decent company like this getting its stock hammered so bad is disheartening, and I am sure shareholders feel down right crushed. However, like most sell offs, this one is quite over done for several reasons;
|Fiscal Year |
|Fiscal Year Ends: ||Dec 31 |
|Most Recent Quarter (mrq): ||Sep 30, 2011 |
|Profit Margin (ttm): ||15.95% |
|Operating Margin (ttm): ||22.63% |
|Management Effectiveness |
|Return on Assets (ttm): ||6.45% |
|Return on Equity (ttm): ||12.36% |
|Income Statement |
|Revenue (ttm): ||576.59M |
|Revenue Per Share (ttm): ||9.97 |
|Qtrly Revenue Growth (yoy): ||-0.10% |
|Gross Profit (ttm): ||346.69M |
|EBITDA (ttm)6: ||148.58M |
|Net Income Avl to Common (ttm): ||77.96M |
|Diluted EPS (ttm): ||1.47 |
|Qtrly Earnings Growth (yoy): ||4.70% |
|Balance Sheet |
|Total Cash (mrq): ||1.10B |
|Total Cash Per Share (mrq): ||19.59 |
|Total Debt (mrq): ||800.00M |
|Total Debt/Equity (mrq): ||120.60 |
|Current Ratio (mrq): ||8.73 |
|Book Value Per Share (mrq): ||11.77 |
|Cash Flow Statement |
|Operating Cash Flow (ttm): ||147.43M |
|Levered Free Cash Flow (ttm): ||81.51M |
The above numbers look good, all on the plus side. WebMD is still a good company. If we consider the 52-week high of 58.55, the current bid of 26.50 is really too low. This is a knee jerk reaction going on here.
For 2012, the company sees revenue down 2%-8% from 2011, with revenue declining more in the first half and improving in the second half. Sure, the stock should be getting sold off, but sold off over 29%? Again, I feel this is way overdone.
WebMD expects an increase in the number of new branded pharmaceutical product introductions as a result of regulatory approvals expected during 2012. This is still a positive for the company.
If we take into account all the negative news here, and current pps, WebMD is being oversold. Even with the new guidance, the stock should be selling near $30 a share. Therefore, wait until the dust clears and volume settles down, then consider going long for at least the mid term, and you should see some decent gains.
Obviously there is more to this story, and there are plenty of news stories out there today with more details than I have given. WebMD might indeed be a good buy after this settles down.
Disclosure: I am long AIS.