UPDATE: UBS Raises Healthways (HWAY) to Buy; Analyst Sees 'Attractive Valuation'
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(Updated - November 8, 2016 8:11 AM EST)
UBS upgraded Healthways (NASDAQ: HWAY) from Sell to Buy with a price target of $24. Analyst A.J. Rice thinks shares are attractive following a recent pullback.
Rice explained, "We upgrade our rating on HWAY shares to Buy from Sell as the company has a cleaner business model post their restructuring, could benefit from continued MA growth and given the more attractive valuation at which HWAY shares are trading post the recent selloff. HWAY shares are down almost 25% since early Oct and roughly 16% since its 3Q16 release due to confusion created by the abrupt departure of recently named CFO for personal reasons. HWAY management stresses to us that the departure, while unfortunate, has no implications for HWAY’s financial results. Our Aug downgrade was predicated on concern that HWAY shares had run up too far too fast and an EV/EBITDA valuation above 10.0x was reflective of a company that has a longer track record than a single quarter post a major restructuring. With the recent pullback, HWAY shares now trade at 8.7x and 8.2x our 2017 & 2018 EBITDA ests, resp (8.2x and 7.7x ex-NOL)."
"We maintain our EV/EBITDA PT multiple of 9.0x & roll-forward onto 2018. This along with a $1.50/share of NOL yields a PT of $24 (an upside of 20.6%). Our EV/EBITDA multiple of 9.0x represents a 10-15% discount to companies with similar growth/margin profiles (such as ACHC) in our healthcare providers coverage (see page 3 for more details)," added the analyst.
Shares of Healthways closed at $19.90 yesterday.
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