We like Almost Family, Inc. (NASDAQ:AFAM) based on their earnings and sales growth, low valuation, demographics, and strong analyst support.
AFAM earnings growth over the past 12 months has been 57% and that is better than 73% of their industry competitors. Revenue and Earnings have both been growing consistently quarter over quarter for the past two years.
The home health care services industry should certainly benefit long term with changing demographics as our population (baby boomers) continues to age. Despite the strong growth, the company PE ratio stands at 16, which is lower than 64% of their competitors, a level suggesting the stock is still undervalued relative to peers given their growth prospects. In early May, the stock price did jump with their most recent quarterly earnings report which exceeded estimates by a surprise +25%.
However, the stock price has been consolidating and trading in a narrow range over the past four weeks after holding the May gains, and we think now is a good time to buy. AFAM also has very good support from analysts, with a consensus rank of 2.0, which represents an overall rating reported to be better than 99% of the entire stock universe. The NASDAQ trading volume for the company stock is a little thin, so we plan to use limit orders on entry and exit.
Currently, institutional ownership represents a lowly 17%, so there is always the upside potential if big traders show more interest and demand for the stock. We do appreciate the downside risk given the recent volatility in the overall market which could always drag AFAM down. However, we like that the stock price has been consolidating and forming a support base at current price levels, which we hope will provide price support if the overall market turns down.
Disclosure: Author is currently long AFAM