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About Option Care Health

Option Care Health is the name and medical infusion services is the game.

Kind of catchy, am I right?

Yeah, I know I’m wrong, but just roll with it, as you might be interested to know that Bannockburn, Illinois-headquartered Option Care Health is a force to be reckoned with within the greater overall healthcare services landscape.

In fact, it is the largest independent infusion therapy company in the world.

In getting a bit more specific on the company and what it actually does, contrary to many of the other healthcare companies we have analyzed in the past, Option Care Health is not an insurance company, such as UnitedHealth Group, Cigna, Molina or Humana, among others, but rather, it actually contracts with insurance entities such as these in order to help patients receive the treatment-related services and infusion-focused products and services they need.

With a vast network of healthcare professionals including doctors and nurses, Option is in the business of selling a plethora of healthcare services, mainly generating revenue through its network of healthcare professionals performing infusion services in a variety of settings such as hospitals, clinics or even a patient’s personal place of residence.

Now, when it comes to what infusion therapies and services even are to begin with, which thankfully isn’t all that challenging to understand as, broadly speaking, infusion therapies basically include any form of medical treatment in an intravenous form, better yet, in the form of an IV, as opposed to taking medicine or receiving a form of treatment orally, or through consuming a drug or medicine.

We might also add that, interestingly enough, Option was recently in the market to wholly acquire a similar home healthcare company by the name of Amedisys, however, the whale of the industry, UnitedHealth Group stepped in, threw in a competitive bid and the rest is almost history, as United is still in the process of buying out Amedisys, leaping through a few legal and financing hurdles, at least for the time being.

In wrapping up this introduction to the company, we will concede that we think the company’s business model and services are naturally resistant to greater overall economic and/or recessionary pressures, as the services it provides hardly ebb and flow with the status of the macroenvironment, but much more so with demand for IV services, which are actually increasing.

It is also worth briefly mentioning that given industry trends, healthcare is expanding at a seemingly exponential rate out of the hospital and other care and treatment centers and further into one’s humble abode, which we view as a general tailwind that is certainly aligned with a company such as this one.

All of this being said, let’s learn more about Option Care Health in the form of its pertinent and relevant financial figures in hopes of figuring out whether or not this company’s stock (NASDAQ: OPCH) is worth pondering as not a short-term, but a long-term investment.

Option Care’s stock financials

First and foremost, Option Care Health is a $5.1 billion company with a corresponding stock price of $28.55, not to mention its price-to-earnings (P/E) ratio of 20.14 along with the fact that it doesn’t issue a regular annual dividend to its shareholders, at least for the time being.

In considering all of this preliminary information, it can be gathered that Option Care Health’s stock (NASDAQ: OPCH) is in sort of an interesting spot in the sense that it is apparently trading at nearly its exact fair value or intrinsic worth, ultimately, what it is worth paying for given the sum of its parts, which is neither good nor bad on its own, however, we are honestly hoping for some sort of hope to be gleaned from the company’s numbers that imply that it is growing its revenues and its overall business, as again, the very industry and segment it operates within is itself growing at a notable rate, which could make it all the more compelling of a case to buy the stock while it is trading at its present fair value ceiling.

Also, not paying a dividend out to shareholders is fairly common among a few of the larger companies within the healthcare sector, and in this context we would rather Option Care Health focus on furthering the expansion of its infusion business(es) than us receive an annual dividend, as opposed to share price appreciation that is likely to follow keen growth execution on the part of Option.

At any rate, according to the company’s balance sheet, Option Care Health’s executives are to tend to and preserve as well as strategically deploy in the neighborhood of $3.1 billion in terms of total assets along with just about $1.7 billion in terms of total liabilities, which is a healthy, favorable gap in our books, as the company is seemingly far more total asset-heavy than total liability-heavy, implying that it can pay down the debt it maintains and, at this juncture, continue hunting for other smaller infusion companies across the United States and overseas as well, hopefully making even more strategic acquisitions and adding more infusionary services and packages within its already impressive portfolio.

Moving over to the company’s income statement, Option’s total annual revenues (measuring since 2018) have risen a great amount, specifically bumping up from $709 million in 2018 to $2.3 billion in 2019, growing further upwards through the $3 billions, leading up to its latest reported annualized revenue figure of a hair under $4 billion, as reported in 2022.

This sudden uptick in year-over-year (YOY) revenue growth can more than likely be attributed to the company closing and inking rather large recent acquisition deals with the likes of BioScrip (in 2019, more than likely the major catalyst of the jump in revenues from $709 million to $2.3 billion in the following year) and Infinity Health, among others.

Nevertheless, it also appears as though Option Care Health has perhaps recently been planting down new infusion centers and treatment sites around the United States and also maybe acquiring more lucrative contracts and partnerships with government entities and health insurance agencies as well, adding to its revenue growth.

Regardless of reason(s), we sure do like where Option’s revenues are going and we don’t immediately foresee any major red flags or reasons as to why this growth in revenue will taper off anytime in the near future, especially if the company continues focusing on potential mergers and acquisition (M&A) targets.

Onto the company’s cash flow statement, Option Care’s net income has recently turned a positive corner (no, really, in the most literal sense), with it standing negative each year including and between 2018 and 2020, however, it has thankfully turned positive and has climbed in recent history, from a relative low of -$76 million in 2019 to a relative high of $151 million, as reported in 2022.

Of course, we do hope that this trend continues but we are also simply glad to see that the company has managed to turn this corner, perhaps through bearing some of the fruits of its acquisition labor, garnering a fair bit of returns and is maybe also becoming more efficient with its capital and the deployment thereof.

Also, the company’s corresponding total cash from operations have been rising on a year-over-year (YOY) basis during the same time period, which is an excellent sign in that Option Care Health is extracting more and more cash from its day-to-day business operations, which, in the context of a fairly scaled business model and operation in a relatively competitive space is no small accomplishment, from our vantage point.

Option Care’s stock fundamentals

Speaking of cash, let’s briefly discuss Option Care’s ability to generate a profit, especially as it relates to the competition, which can handily be found on TD Ameritrade’s platform, specifically referencing its displayed trailing twelve month (TTM) net profit margin of 6.12% to the industry’s respective average of 1.59%, which, to us, is a significant difference, as, simply put, Option is far better at, after all expenses and input costs and other associated costs, producing a profit on a trailing twelve month basis, being a great competitive edge when going up against the myriad of competitors it faces daily.

When it comes to the company’s core TTM returns as they both relate to assets and investments, Option’s are also in a much better state than the competition’s displayed averages, with, for example, the company’s TTM return on assets standing at 8.15% to the industry’s average of 5.77%, not to mention the company’s TTM return on investment pegged at 10.08% to the industry’s 3.92%, all according to the figures displayed on TD Ameritrade’s platform and all leading us to devise the opinion that Option Care Health is a company that is engaged in profitable projects and initiatives and it is also crafty and smart with the way it deploys its given capital.

Should you buy Option Care Health stock?

With demand more than likely continuing to rise for in-home health services, and with that, in-home infusion services, the industry in which it operates being fairly recession resistant, its balance sheet maintaining a wonderful posture, its revenues growing at a favorable rate and with that, it has seemingly remained intent on pursuing mergers and acquisitions within its category, along with the fact that its TTM returns on assets and investments are more than competitive and its TTM net profit margin, well, is just about the same as its aforementioned returns on assets and investments, we don’t hold too many complaints when it comes to Option Care Health and its stock (NASDAQ: OPCH).

Additionally, with the company’s stock trading at pretty much exact fair value, I still deem it appropriate to offer this company a “buy” rating given its current and future growth prospects and catalysts.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.