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Smallville hospital has one neonatal doctor to cover the neonatal ICU. His malpractice premiums are over $100,000 a year and he makes $150,000 over that. He is tired and living check to check. His wife is banging the lawn man and he is too tired to care. Then along comes Pediatrix Medical Group, Inc (PDX). He now makes $200,000 a year, pumps iron, eats Nitrotech and gets busy with the nanny while his wife is now the laughing stock of the country club . His life is now bliss as he punts the bag that used to be Mrs. Doctor.
Look at poor Dr. McCoy. Do you think if he had PDX collecting his bills, he'd have to go out on a Starship to find work?
Today I bought PDX at 60.14. I will sell it in 4 to 6 weeks at 69.63. Here’s why I like PDX:
In the world of intensive care medicine the Michael Jordan's of the field are neonatologists. They have the game to nurse the 12 oz babies to health and send them home. However, solo practice is often not possible or wise. Caring for these Thumbelina's can take its toll on a physician. Enter PDX, a group practice model. Pay all the docs expenses and give them a check. Limit their hours with extensive cross coverage. Everyone pays for neonatal care, if the parents have no insurance then Uncle Sam steps in to cover. The restructuring of the company has paid off nicely. Pass the Pedialyte and count your cash, another $$$MR. MARKET$$$ marvel.
PDX stock is up over 163% in the last 52 weeks yet its PE is an extremely humble 17.6. The steady climb of its stock price is a model of consistency. Can you draw a straight line going up? Good…you’ve just drawn PDX’s chart. With an r^2 of 0.95, this is the price momentum of $$$MR. MARKET$$$’s wet dreams. For the chartists of the world PDX has been forming a very nice base for the last several weeks.
So start the sappy music. Here’s what PDX believes in:
• A dedication to the best possible patient outcomes;
• A belief in information systems to document the care provided, and to share knowledge among all professionals;
• A commitment to lifelong education; and
• A belief that the physician - the clinical professional who admits patients into hospitals, prescribes pharmaceuticals and diagnostic tests - has earned a seat at the table where the nation´s healthcare reform debate is taking place.
• Pedatrix's huge database of neonatal clinical outcomes. It gives group members access to neonatal clinical research. The ability to tap into this database helps them (better) practice medicine and helps with their clinical research.
Here’s what $$$MR. MARKET$$$ believes in….earnings earnings earnings. PDX, despite its runup, is still undervalued.
Pediatrix is now the only player of its type with a national presence. Highlights for the three months ended December 31, 2003, include:
• Earnings per share of 97 cents, up 33 percent from the comparable prior period;
• Revenue of $145.8 million, an increase of 22 percent, with strong same-unit revenue growth of 13.6 percent;
• Net income of $24.0 million, an increase of 26 percent; and
Plug these earnings into a valuation model and if we assume initial earnings of $84.4 million grow at a rate of 15.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $844 million. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $1.49 billion. To complete the calculation we add these two figures together, subtract the long-term debt for PDX ($1.20 million), and divide by the outstanding shares (24.4 million) to get a per share intrinsic value of $95.82.
Combined, Pediatrix and its affiliated professional corporations employ more than 690 physicians in 30 states and Puerto Rico. Pediatrix is also the nation's largest provider of newborn hearing screens and newborn metabolic screening. They have 18% of the market and are growing. This is the classic roll up strategy which is so familiar with many $$$MR. MARKET$$$ winning stocks. Buying earnings at a discount price, then rolling them up and squeezing out overhead is a formula that works well, especially in businesses where price inelasticity is prevalent. Medicaid covers care for mothers and babies without insurance. PDX is a major US corporation with revenues of $551 million last year. They are here to stay.
Many doctors choose to join Pediatrix to avoid all of the insurance red tape. Pediatrix has the economies of scale to properly deal with insurers. MD’s can just concentrate on making sick patients well again and the younger docs love this. This makes it easier for PDX to make acquisitions because doctors have confidence they won't have to fight insurers or a Medicaid probe. PDX comes to these guys with cold hard cash to buy out their practices. The young doctors think of taking the money straight to Marine Max to buy a new boat. He'll drink 1000 beers and go out for a spin:
The PDX formula works. Divide and conquer. There's a long list of small practices with anywhere from four to 12 physicians in a very fragmented market. Pediatrix is playing Pac man. PDX can go out and acquire practices without competition for them, so they underpay. Pediatrix scouts out practices with good local reputations and doctors who fit in culturally and like the idea of practicing in a large group.
PDX has at least eight straight quarters of 26%-or-better earnings growth. Revenues have grown each and every year for the last 9 years. Over the last 5 years, sales growth has been 40% per year. ANALysts claim that PDX will bank $4.06/share in 2004. PDX always seems to beat their numbers. The company has already advised that they see $4.10 per share on the high end. $$$MR. MARKET$$$ sees PDX getting to $4.47/share in 2004 which would translate to a stock price of $78.67 which is well past my sell target.
PDX is also thumping on the vertical integration frontier. Last year PDX bought Neo Gen Screening, a Pittsburgh-based laboratory specializing in newborn metabolic screening. Renamed Pediatrix Screening Inc., it's the nation's largest such lab and boasts several proprietary methods to screen for genetic disorders in the first few days of a baby's life. Newborn screening is mandated by many states and Pediatrix's doctors will send all their genetic lab work to the new subsidiary. . Isn’t being a baby great? All you do is eat, sleep and when you dump in your pants, someone changes you.
And the customer base just keeps on coming. As long as the manufacturing process doesn’t change PDX will continue to receive patients. Childbirth occurs no matter what happens to interest rates, OPEC production or the price of the Euro. Pediatrics can go into a community and buy a couple of practices and already have the majority of the neonatologists in the area. Most other areas of healthcare remain ridiculously fragmented. PDX can count on a perpetual revenue stream in any market they enter.
One of their most recent acquisitions was announced last week. The practice consists of three physicians and seven advanced practitioners who staff several of the hospital's units that have combined annual patient volume of more than 13,500 pediatric patient days, including more than 8,000 neonatal and 1,500 pediatric intensive care patient days. The practice also provides care in the well baby nursery, and manages the newborn hearing screen program at Tallahassee Memorial.
"We were very deliberate in our decision to join Pediatrix and we are excited about the opportunities that our integration into this national group of physicians will create for our patients at Tallahassee Memorial," said Todd Patterson, D.O. Dr. Patterson founded the practice in 1985, and will serve as Pediatrix's Medical Director at Tallahassee Memorial. In addition to his clinical duties, he is a member of the board of directors of Tallahassee Memorial Hospital and is the immediate-past Chief of Staff at the hospital.
Pediatrix's acquisition of the Tallahassee practice expands its national physician group practice within the State of Florida, from a base that includes neonatal physician services in Fort Lauderdale, West Palm Beach, Melbourne, Orlando, Tampa, and Pensacola, pediatric intensive care services in Fort Lauderdale, and pediatric cardiology services in South Florida.
Here’s what the boss has to say:
"By every measure, this was a very solid quarter that was part of an exceptional year for our national group practice," said Roger J. Medel, M.D., President and Chief Executive Officer of Pediatrix Medical Group, Inc. "During 2003 we identified new growth opportunities while remaining focused on managing our core newborn and maternal-fetal care operations. We added pediatric intensive and pediatric cardiology practices to our physician services platform and newborn metabolic screening to our existing newborn screening services. At the same time, we grew our existing operations with new neonatal hospital contracts and strong same-unit growth. We remain confident in our ability to execute our growth strategy."
He won’t be having any tantrums soon. % Long Term Debt of Capitalization is only 0.2%. They are fueling their acquisitions with the cash flow spewing out of their growth engine. What you have is an extremely well run company. In the event they needed to make a quick pickup, they have plenty of leverage capacity. The reason for this is that Return on Assets is 12.3% (versus Industry average of 7.3%) and Return on Equity is 15.1%. Pre-tax profit margins are 25%. There’s no phony accounting going on. They are filling their diapers with cash.
Now pass me some more apple juice while I watch the Final Four. If Oklahoma State beats UConn, I win my office pool.
Look at poor Dr. McCoy. Do you think if he had PDX collecting his bills, he'd have to go out on a Starship to find work?
Today I bought PDX at 60.14. I will sell it in 4 to 6 weeks at 69.63. Here’s why I like PDX:
In the world of intensive care medicine the Michael Jordan's of the field are neonatologists. They have the game to nurse the 12 oz babies to health and send them home. However, solo practice is often not possible or wise. Caring for these Thumbelina's can take its toll on a physician. Enter PDX, a group practice model. Pay all the docs expenses and give them a check. Limit their hours with extensive cross coverage. Everyone pays for neonatal care, if the parents have no insurance then Uncle Sam steps in to cover. The restructuring of the company has paid off nicely. Pass the Pedialyte and count your cash, another $$$MR. MARKET$$$ marvel.
PDX stock is up over 163% in the last 52 weeks yet its PE is an extremely humble 17.6. The steady climb of its stock price is a model of consistency. Can you draw a straight line going up? Good…you’ve just drawn PDX’s chart. With an r^2 of 0.95, this is the price momentum of $$$MR. MARKET$$$’s wet dreams. For the chartists of the world PDX has been forming a very nice base for the last several weeks.
So start the sappy music. Here’s what PDX believes in:
• A dedication to the best possible patient outcomes;
• A belief in information systems to document the care provided, and to share knowledge among all professionals;
• A commitment to lifelong education; and
• A belief that the physician - the clinical professional who admits patients into hospitals, prescribes pharmaceuticals and diagnostic tests - has earned a seat at the table where the nation´s healthcare reform debate is taking place.
• Pedatrix's huge database of neonatal clinical outcomes. It gives group members access to neonatal clinical research. The ability to tap into this database helps them (better) practice medicine and helps with their clinical research.
Here’s what $$$MR. MARKET$$$ believes in….earnings earnings earnings. PDX, despite its runup, is still undervalued.
Pediatrix is now the only player of its type with a national presence. Highlights for the three months ended December 31, 2003, include:
• Earnings per share of 97 cents, up 33 percent from the comparable prior period;
• Revenue of $145.8 million, an increase of 22 percent, with strong same-unit revenue growth of 13.6 percent;
• Net income of $24.0 million, an increase of 26 percent; and
Plug these earnings into a valuation model and if we assume initial earnings of $84.4 million grow at a rate of 15.00%, and we discount those future earnings at a rate of 15.00%, we arrive at a net present value for the company's next 10 years of earnings of $844 million. To account for potential earnings beyond the 10th year, we estimate a growth rate of 6.00%, a discount rate of 12.00%, and we arrive at a continuing value of $1.49 billion. To complete the calculation we add these two figures together, subtract the long-term debt for PDX ($1.20 million), and divide by the outstanding shares (24.4 million) to get a per share intrinsic value of $95.82.
Combined, Pediatrix and its affiliated professional corporations employ more than 690 physicians in 30 states and Puerto Rico. Pediatrix is also the nation's largest provider of newborn hearing screens and newborn metabolic screening. They have 18% of the market and are growing. This is the classic roll up strategy which is so familiar with many $$$MR. MARKET$$$ winning stocks. Buying earnings at a discount price, then rolling them up and squeezing out overhead is a formula that works well, especially in businesses where price inelasticity is prevalent. Medicaid covers care for mothers and babies without insurance. PDX is a major US corporation with revenues of $551 million last year. They are here to stay.
Many doctors choose to join Pediatrix to avoid all of the insurance red tape. Pediatrix has the economies of scale to properly deal with insurers. MD’s can just concentrate on making sick patients well again and the younger docs love this. This makes it easier for PDX to make acquisitions because doctors have confidence they won't have to fight insurers or a Medicaid probe. PDX comes to these guys with cold hard cash to buy out their practices. The young doctors think of taking the money straight to Marine Max to buy a new boat. He'll drink 1000 beers and go out for a spin:
The PDX formula works. Divide and conquer. There's a long list of small practices with anywhere from four to 12 physicians in a very fragmented market. Pediatrix is playing Pac man. PDX can go out and acquire practices without competition for them, so they underpay. Pediatrix scouts out practices with good local reputations and doctors who fit in culturally and like the idea of practicing in a large group.
PDX has at least eight straight quarters of 26%-or-better earnings growth. Revenues have grown each and every year for the last 9 years. Over the last 5 years, sales growth has been 40% per year. ANALysts claim that PDX will bank $4.06/share in 2004. PDX always seems to beat their numbers. The company has already advised that they see $4.10 per share on the high end. $$$MR. MARKET$$$ sees PDX getting to $4.47/share in 2004 which would translate to a stock price of $78.67 which is well past my sell target.
PDX is also thumping on the vertical integration frontier. Last year PDX bought Neo Gen Screening, a Pittsburgh-based laboratory specializing in newborn metabolic screening. Renamed Pediatrix Screening Inc., it's the nation's largest such lab and boasts several proprietary methods to screen for genetic disorders in the first few days of a baby's life. Newborn screening is mandated by many states and Pediatrix's doctors will send all their genetic lab work to the new subsidiary. . Isn’t being a baby great? All you do is eat, sleep and when you dump in your pants, someone changes you.
And the customer base just keeps on coming. As long as the manufacturing process doesn’t change PDX will continue to receive patients. Childbirth occurs no matter what happens to interest rates, OPEC production or the price of the Euro. Pediatrics can go into a community and buy a couple of practices and already have the majority of the neonatologists in the area. Most other areas of healthcare remain ridiculously fragmented. PDX can count on a perpetual revenue stream in any market they enter.
One of their most recent acquisitions was announced last week. The practice consists of three physicians and seven advanced practitioners who staff several of the hospital's units that have combined annual patient volume of more than 13,500 pediatric patient days, including more than 8,000 neonatal and 1,500 pediatric intensive care patient days. The practice also provides care in the well baby nursery, and manages the newborn hearing screen program at Tallahassee Memorial.
"We were very deliberate in our decision to join Pediatrix and we are excited about the opportunities that our integration into this national group of physicians will create for our patients at Tallahassee Memorial," said Todd Patterson, D.O. Dr. Patterson founded the practice in 1985, and will serve as Pediatrix's Medical Director at Tallahassee Memorial. In addition to his clinical duties, he is a member of the board of directors of Tallahassee Memorial Hospital and is the immediate-past Chief of Staff at the hospital.
Pediatrix's acquisition of the Tallahassee practice expands its national physician group practice within the State of Florida, from a base that includes neonatal physician services in Fort Lauderdale, West Palm Beach, Melbourne, Orlando, Tampa, and Pensacola, pediatric intensive care services in Fort Lauderdale, and pediatric cardiology services in South Florida.
Here’s what the boss has to say:
"By every measure, this was a very solid quarter that was part of an exceptional year for our national group practice," said Roger J. Medel, M.D., President and Chief Executive Officer of Pediatrix Medical Group, Inc. "During 2003 we identified new growth opportunities while remaining focused on managing our core newborn and maternal-fetal care operations. We added pediatric intensive and pediatric cardiology practices to our physician services platform and newborn metabolic screening to our existing newborn screening services. At the same time, we grew our existing operations with new neonatal hospital contracts and strong same-unit growth. We remain confident in our ability to execute our growth strategy."
He won’t be having any tantrums soon. % Long Term Debt of Capitalization is only 0.2%. They are fueling their acquisitions with the cash flow spewing out of their growth engine. What you have is an extremely well run company. In the event they needed to make a quick pickup, they have plenty of leverage capacity. The reason for this is that Return on Assets is 12.3% (versus Industry average of 7.3%) and Return on Equity is 15.1%. Pre-tax profit margins are 25%. There’s no phony accounting going on. They are filling their diapers with cash.
Now pass me some more apple juice while I watch the Final Four. If Oklahoma State beats UConn, I win my office pool.
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