UPDATE: UBS Downgrades Healthways (HWAY) to Sell
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(Updated - August 25, 2016 8:27 AM EDT)
UBS downgraded Healthways (NASDAQ: HWAY) from Neutral to Sell with a price target of $22.50. Analyst A.J. Rice questioned if shares ran too far, too fast.
"HWAY shares are up 110% since announcing the restructuring and now trade at 10.3x our 2017 EBITDA est. HWAY now sees its LT rev growth in the upper single-digits and its EBITDA margin in excess of 20%. We are refining our model to reflect a roughly 7.0% top-line growth and EBITDA margin at roughly 21.5% for 2017E & beyond. While HWAY has a cleaner profile, we believe recent share price gains are more than discounting the earnings stability and future growth HWAY hopes to achieve. Within our Healthcare Providers coverage, the companies with similar growth and margin profiles (such as ACHC) are trading at roughly 10.5x our 2017 EBITDA est despite multiyear track records of delivering on growth targets. We would not be surprised to see HWAY shares give back some of the recent gains and settle in at roughly 9x proj 2017 EBITDA until the company posts several quarters confirming the achievability of its targets going forward. This would yield a PT of $22.50 (includes $1.50/share of NOL)," said Rice.
Shares of Healthways closed at $25.56 yesterday.
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