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On Thursday, JMP Securities maintained its Market Outperform rating on shares of Option Care Health (NASDAQ:OPCH), with a steady price target of $37.00. The firm highlighted a competitor's exit from the acute therapy business in New England as a potential advantage for Option Care Health.
The departure of this sizable competitor is seen as a testament to the challenges of providing a comprehensive range of therapies, especially in the acute category, which has a shorter treatment duration compared to chronic treatments.
Option Care Health's diverse portfolio, which includes both acute (25% of revenue) and chronic (75%) medications, is distributed through a network of 182 locations nationwide. This breadth of offerings is considered a significant competitive edge for the company.
Despite the immediate disruptions caused by recent hurricanes, JMP Securities views the competitor's market withdrawal as a beneficial development for Option Care Health. This change in the competitive landscape is expected to open up opportunities for the company to increase its market share in a key region.
JMP Securities has decided to maintain its earnings estimates and $37 price target for Option Care Health, which is approximately 14 times the projected 2025 EBITDA. The firm's valuation is based on the stock recently trading at around 12 times its next twelve months (NTM) EBITDA estimate.
This is compared to Option Care Health's two-year average of about 15 times EBITDA. The firm's positive outlook is further supported by an anticipated 13% compound annual growth rate in earnings per share from 2024 to 2026, although this projection does not factor in any potential share buyback activities beyond the second quarter of 2024.
The firm's continued confidence in Option Care Health is rooted in the company's leading scale, expected improvements in operating leverage, potential for further market share gains, and the prospects of capital deployment contributing to the company's growth.
In other recent news, Option Care Health has been the subject of several significant developments. The company demonstrated resilience amidst a challenging second quarter, marked by a cyberattack and supply chain disruptions, and still managed to deliver a 14.8% year-over-year growth. The company's earnings call revealed that it generated an additional $10 million in gross margin and reduced its accounts receivable, despite these hurdles.
In addition to this, Option Care Health reported the purchase of $78 million of its own stock and increased its revenue expectations for the year to between $4.75 billion and $4.85 billion. The company's strategic focus on mergers and acquisitions, as well as share repurchase strategies, was also highlighted.
On the other hand, Deutsche Bank reaffirmed its Buy rating on Option Care Health, citing the company's historical success in adapting to market changes. This includes the introduction of biosimilars and competition from subcutaneous treatments.
The bank's analysis also acknowledged the debate around Option Care Health's handling of upcoming biosimilar competition, particularly concerning the drug Stelara, which contributes a high single-digit percentage to the company's total sales.
These recent developments reflect Option Care Health's ability to navigate market shifts and maintain growth, despite uncertainties in the market and potential challenges ahead.
InvestingPro Insights
Option Care Health's market position and growth prospects, as highlighted by JMP Securities, are further supported by recent data from InvestingPro. The company's market cap stands at $4.94 billion, with a P/E ratio of 24.07, indicating investor confidence in its earnings potential. This aligns with the InvestingPro Tip that analysts predict the company will be profitable this year.
Option Care Health has demonstrated solid financial performance, with revenue growth of 11.07% over the last twelve months as of Q2 2024, reaching $4.59 billion. The company's operating income margin of 6.87% during the same period suggests efficient operations, supporting JMP Securities' view on the company's competitive edge and potential for market share growth.
An InvestingPro Tip notes that management has been aggressively buying back shares, which could contribute to the anticipated earnings per share growth mentioned in the article. Moreover, the stock's low price volatility, as indicated by another InvestingPro Tip, may appeal to investors seeking stability in the healthcare sector.
For readers interested in a deeper analysis, InvestingPro offers 5 additional tips for Option Care Health, providing a more comprehensive view of the company's prospects and market position.
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