Excessive selloffs and corrections are great for investors to make discounted entries in the stocks of their choice. However, these opportunities should be explored with caution as the initial discount can eventually translate into debt trap. Addus Homecare Corporation (NASDAQ: ADUS) and Alphatec Holdings Inc. (NASDAQ: ATEC) are currently under sale although both companies boast of improving operations and strong balance sheets. Here is a closer look.
Addus Homecare Corporation is a healthcare company which offers personal care and daily living assistance to its clients. The company's stock has seen a correction lately, bringing down the prices to $23.7 from $29 per share in March. This correction becomes more attractive in view of the strong and consistent demand its services have received in recent years. Although not really skyrocketing, adult day care services are witnessing good demand, particularly among baby boomers, as the company's straight line revenue growth in recent years indicates.
There have been some cases of delayed payments to the company as there are always when the governments are involved; however, all factors considered, it is a great business to own. The company's earnings growth in recent years has outpaced its top line growth, which is another great sign of an attractive business. Moreover, the balance sheet is free of debt while the stock's valuation at 18.7 times forward earnings is compelling. The latest correction stems from the pressure on margins in the most recent quarter; however, it is not really a deal breaker and is not likely to be more than a passing phase.
What can be said of Addus Homecare cannot be for Alphatec Holdings Inc., except for top line growth. This California based medical technology firm has been raking in losses after losses in recent years. However, the surging top line indicates there are enough believers in the company's products for the surgical treatment of spine disorders. The company's annual revenues have grown from just $171 million in 2010 to more than $204 million in 2013.
Since the company continues to make losses, there is little to talk about valuations, although debt equity ratio of 0.41 and hefty discounts on price by book value and price by sales ratios are positive indicators. The latest correction brought the shares to a new 52-week low which also means the downside from here must be quite limited. Finally, a vote of trust comes from Canaccord Genuity which has put a 'buy' rating on the stock with a target price of $3 per share, representing 100 percent upside from current levels.