Alliance Health
/ (AIQ-NASDAQ)Current Price (12/30/16) / $9.60
Valuation
OUTLOOK
Analyst must writeSUMMARY DATA
52-Week High / $9.6052-Week Low / $5.77
One-Year Return (%) / 4.58
Beta / 0.96
Average Daily Volume (sh) / 44,095
Shares Outstanding (mil) / 11
Market Capitalization ($mil) / $103
Short Interest Ratio (days) / N/A
Institutional Ownership (%) / 25
Insider Ownership (%) / 55
Annual Cash Dividend / $0.00
Dividend Yield (%) / 0.00
5-Yr. Historical Growth Rates
Sales (%) / -0.3
Earnings Per Share (%) / 32.6
Dividend (%) / N/A
P/E using TTM EPS / 9.1
P/E using 2017 Estimate / -10.7
P/E using 2018 Estimate / -64.0
Zacks Rank / N/A
Risk Level / Above Avg.,
Type of Stock / N/A
Industry / Medical Service
Zacks Rank in Industry / N/A
KEY POINTS
Analyst must write
OVERVIEW
Analyst must write
INDUSTRY OUTLOOK
INDUSTRY OUTLOOK - POSITIVE
The medical devices and supplies industry consists of all the companies that supply medical devices and supplies to healthcare services providers such as hospitals, outpatient surgery centers, physician practice management groups, nursing homes, assisted living facilities, and homecare providers. The medical devices and supplies industry does not include pure-play pharmaceutical companies, although some medical device companies include smaller pharmaceutical divisions. The medical supplies industry contains a diverse group of companies that range from high technology cardiovascular companies that manufacture implantable cardiac defibrillators, to healthcare information technology companies, to companies that specialize in the distribution of more basic medical supplies such as dental products, bandages and syringes, and to companies that manufacture and offer services in the elective cosmetic medical procedures.
The overall health of the medical devices and supplies industry can be characterized as very healthy, as there are several factors which continue to promote the current favorable situation. It is a large and quite diverse industry, and it has been estimated that the overall industry generated approximately $260 billion in revenue in 2003, and made up approximately 3% of the U.S. GDP. The industry is growing at a rate well above the rate of U.S. GDP growth, and it has been projected to continue to grow well above nominal GDP growth. The major factors that influence the industry are the aging U.S. population, the U.S. third-party payment system, and rapid technological changes that flow through the industry.
The aging U.S. population will play an ever-growing role in the medical supplies industry over the next 25 years. As a large segment of the U.S. population ages (baby boom generation), there should be a corresponding increase in demand for healthcare services. This demand will be fueled mainly by the necessary medical procedures that tend to develop as people age, but will also be driven by those who choose to maintain an active lifestyle and require sports medicine procedures and replacement joints and other synthetic body parts. This demand should be additionally driven by those who choose elective cosmetic and lifestyle procedures which have become increasingly popular.
The third party payment system allows medical devices and supplies companies to keep increasing their prices at rates greatly above inflation. The health insurance industry continues to book double-digit rate increases, combined with higher co-payments and deductibles from employees with no end in sight. The current health insurance system does not allow the employee to negotiate for the price of the medical device and supplies, and the medical device company can generally pass on its price increases to the hospital and health insurance industries. The other facet of the third party system is the U.S. and state governments with their Medicare and Medicaid programs. In a very similar way, as long as someone else is paying the bill (Medicare in this case) the medical device companies can more easily pass along price increases. An important note here is that many elective procedures are not covered by Medicare or health insurance, and the companies in elective surgery medical devices face a more difficult pricing picture. The overall effect of the third party system is that the medical devices industry benefits from price increases that easily outstrip inflation every year.
Technology tends to evolve very quickly in the industry, and companies tend to copy or attempt to copy each other's products if it is believed it will be the next big product or will serve a new market. A current example of this is the drug-eluting stent. For years bare-metal stents have been used to prop open closed veins and arteries to allow continuous blood flow. A problem called restenosis could develop where the blood could clot around the stent, and the further surgery would be required to clear the clot and install a new stent. Johnson & Johnson (JNJ) has been at the forefront of the drug-eluting stent technology with its CYPHER product. This is a stent coated with a drug that prevents or dramatically slows restenosis, and thus prevents future surgeries.
JNJ's CYPHER was launched in 2003, but was plagued with inventory and product quality issues. Boston Scientific (BSX) has also been toward the front in developing its drug-eluting stent, TAXUS, and this product was launched in early 2004. BSX has quickly capitalized on JNJ's missteps and has gained 75% market share in drug-eluting stents. Two other companies with very strong bare-metal stent franchises, Medtronic and Guidant, have been far behind BSX and have recently faced negative drug-eluting stent quality data. JNJ and MDT are both such large and diversified companies that their problems have not hurt their stock price, while BSX has gained tremendously in an estimated $5 billion annual market, and GDT's stent franchise has been damaged and its stock price has fallen. The drug-eluting stent is a more expensive product than a bare-metal stent, $2,500 vs. $1,000, but it could prevent future surgeries, and it has created a $5 billion market very quickly. The largest companies such as JNJ or MDT are so diversified that this type of development should not dramatically affect its stock price, but a smaller company such as BSX, which is focused on the drug-eluting stent can make tremendous gains. An investor who wishes to make such gains will need to accept the risk of a smaller company that is focused on few product lines with tremendous potential.
INDUSTRY POSITION
Analyst must write
RECENT NEWS
Analyst must write
VALUATION
Analyst must write
RISKS
Analyst must write.
INSIDER TRADING AND OWNERSHIP
Analyst must write.
PROJECTED INCOME STATEMENT & BALANCE SHEET
Historical Stock Price
DISCLOSURES
The following disclosures relate to relationships between Zacks Small-Cap Research (“Zacks SCR”), a division of Zacks Investment Research (“ZIR”), and the issuers covered by the Zacks SCR Analysts in the Small-Cap Universe.
ANALYST DISCLOSURES
I, Steven Ralston, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report. I believe the information used for the creation of this report has been obtained from sources I considered to be reliable, but I can neither guarantee nor represent the completeness or accuracy of the information herewith. Such information and the opinions expressed are subject to change without notice.
INVESTMENT BANKING AND FEES FOR SERVICES
Zacks SCR does not provide investment banking services nor has it received compensation for investment banking services from the issuers of the securities covered in this report or article.
Zacks SCR has received compensation from the issuer directly or from an investor relations consulting firm engaged by the issuer for providing non-investment banking services to this issuer and expects to receive additional compensation for such non-investment banking services provided to this issuer.The non-investment banking services provided to the issuer includes the preparation of this report, investor relations services, investment software, financial database analysis, organization of non-deal road shows, and attendance fees for conferences sponsored or co-sponsored by Zacks SCR.The fees for these services vary on a per-client basis and are subject to the number and types of services contracted. Fees typically range between ten thousand and fifty thousand dollars per annum. Details of fees paid by this issuer are available upon request.
POLICY DISCLOSURES
This report provides an objective valuation of the issuer today and expected valuations of the issuer at various future dates based on applying standard investment valuation methodologies to the revenue and EPS forecasts made by the SCR Analyst of the issuer’s business.
SCR Analysts are restricted from holding or trading securities in the issuers that they cover. ZIR and Zacks SCR do not make a market in any security followed by SCR nor do they act as dealers in these securities. Each Zacks SCR Analyst has full discretion over the valuation of the issuer included in this report based on his or her own due diligence. SCR Analysts are paid based on the number of companies they cover.
SCR Analyst compensation is not, was not, nor will be, directly or indirectly, related to the specific valuations or views expressed in any report or article.
ADDITIONAL INFORMATION
Additional information is available upon request. Zacks SCR reports and articles are based on data obtained from sources that it believes to be reliable, but are not guaranteed to be accurate nor do they purport to be complete. Because of individual financial or investment objectives and/or financial circumstances, this report or article should not be construed as advice designed to meet the particular investment needs of any investor. Investing involves risk. Any opinions expressed by Zacks SCR Analysts are subject to change without notice. Reports or articles or tweets are not to be construed as an offer or solicitation of an offer to buy or sell the securities herein mentioned.