Home infusion services provider BioScrip (BIOS) announced mixed first-quarter earnings results on May 9. Investors initially had a negative reaction to the earnings release, sending the stock price down nearly 10 percent to $5.94 per share in early morning trading. However, that trend reversed later in the day and the stock finished at $7.10 per share, up nearly 20 percent from its low on the day. Since May 9, the stock has climbed another 4.79 percent to $7.44.
The May 9 earnings release had two seemingly contradictory messages. On one hand, the company reported a loss of $0.13 per share, which was substantially higher than analyst expectations of $0.02 per share. On the other hand, the company also reported higher than expected revenue at $239.6 million versus analyst expectations of $221 million. BioScrip also announced 2014 revenue guidance of $940 to $980 million, which is higher than analyst expectations of $922 million.
The fact that BioScrip had lower earnings on better-than-expected revenue suggests that the company still has some operational and process issues to work through to improve their margins. That’s understandable in a fast-growing company. Often, companies that are in the early stages of the business cycle, like BioScrip, are more focused on top-line growth than maximizing margins.
The revenue results and guidance suggest that BioScrip is growing much faster than most analysts expect. Top-line results are what’s most important with a fast-growing company like BioScrip. A fast-growing company can always refine its processes to improve its margins. However, even the most efficient company will be unsuccessful if its not achieving top-line growth.
BioScrip provides home healthcare solutions, specializing in treatments that require infusion. The company partners with physicians, hospitals, insurance companies, and patients to bring treatment that would normally have to be done in a facility into the patient’s home. The company has 33 locations in 25 metropolitan locations.
The market for in-home health care has exploded in recent years. There’s substantial opportunity for a company like BioScrip to align itself with a major pharmaceutical chain. In fact, CVS paid nearly $2.1 billion at the end of 2013 for one of BioScrip’s competitors, Coram. Although Coram has greater reach than BioScrip, with 85 total locations, the companies are very similar in terms of services and financials.
Even with BioScrip’s most recent run, it could still represent good value for those looking to get into the home healthcare market. It’s current price of $7.44 is well below its 200-day moving average of $8.61. As the company continues to refine its process and improve its margins, it could have tremendous upside.
By Ryan S.