LHC Group: Value, meet growth.

LHC Group - Ticker symbol LHCG

Background:

LHC Group is in the business of home health care services; meaning they provide care for the sick and elderly in peoples own homes. 

LHC's business model provides a leaner, faster and more efficient way of doing things than the hospitals that usually provide this care. 

The industry as a whole is highly fragmented - with a 500 million $ market cap, LHCG is considered a large player. They operate primarily in the south of the US, but have made moves to expand.

Fundamentals:

LHCG has shown phenomenal growth over the last four years; They have gone from earning 218 million in 2006 to earning 531 million $ in 2009 - a compounded growth rate of 35 % pr. year. 

Their balance sheet is pristine with no debt to speak of, and a shareholders equity that has grown along with their top and bottom line. 

Thesis: 

With the babyboomer generation getting to retirement and beyond, a lot of people needs to be taken care of.

The market will only get bigger going forward, the industry has yet to be consolidated, and the company itself has plenty of room to grow - either organically or through acquisitions. And with a visionary founder still at the helm, a share buyback program in progress LHC has a lot going for them.

Earlier in the year Mr. Market pounded the stock due to fears based on the effect that Obama's healthcare reform bill would have on their earnings ability. It has yet to fully rebound, and trading at around 10 times earnings they are relatively cheap, and with a PEG at 0.30, I would say there is tremendous value at this price. 

Conclusion: 

Computed on a conservative basis the shares have fair value between 40 and 60, but they have the invaluavble quality of a promising industry, great leadership, and plenty of room to grow. 

This is the kind of company I wouldn't mind owning for the next 10 + years. 

Dicslosure: long LHCG