Is Apollo Medical Stock A Buy?

Is Apollo Medical Stock A Buy? The American healthcare system is quite a complex thing, to say the least. A completely separate beast from, say, the Canadian healthcare system or the United Kingdom’s healthcare system, the United States definitely stands alone in the world, for better or for worse.

One of the things that sets America apart is its hybrid system of sorts, which relies on both private and public funding to operate. For this reason, the United States’ healthcare system depends on healthcare systems, and medical holding companies to help manage them. These holding companies handle the finances, and that makes for a potentially great opportunity for retail investors and traders.

What Does Apollo Medical Do?

This is where Apollo Medical Holdings (AMEH), often abbreviated as ApolloMed, comes into play.

Because hospital funding comes from all sorts of sources in the US, there’s a need for these medical holding companies to handle things like financial risk and the cost of care within a specific network of healthcare facilities.

Apollo Medical posits itself as a company that prioritizes physicians, patients, and technology before all else — a refreshing perspective, to be sure, but also one that has resulted in great success for ApolloMed.

Since the company’s inception, over a million patients have been cared for by over 7,000 physicians across the country.

Apollo Medical spends a lot of time and energy investing in innovative software and technology to help improve the healthcare industry for both patients and medical professionals alike.

Not only does this improve the quality of the care being given and received, it also makes that care vastly more efficient. Much of this comes from automating the kinds of tedious tasks that otherwise would’ve taken those professionals all kinds of extra time to complete, freeing them up to spend more time helping patients.

Apollo Medical Revenues and Earnings Forecasts

Between January 1st and December 31st of 2020, Apollo Medical brought in over $687 million dollars in total revenue, a significant increase from its $560 million in total revenue from 2019.

This is an impressive feat, to be sure, but it’s important to consider the net income too: After expenses and all else is accounted for, Apollo Medical walked away with a net income of over $122 million. Once again, this is a massive improvement over the previous year’s net income of almost $18 million.

Looking forward, analysts forecast Apollo Medical’s shares to continue an upward trend for a bit. However, many are divided on exactly when its stock price will eventually drop back down. Some say they expect Apollo Medical’s price per share to drop down around $36 a year from now, while others expect the price per share to sit much closer to the $100 mark in June of 2022. Split the difference and you end up with a price per share of around $68.

We’ll consider a more traditional valuation analysis below using discounted cash flow forecasts to identify where fair value lies.

No matter what, though, it seems agreed upon that the company’s substantial net income certainly warrants an uptick in price per share and that its current high won’t last forever.

Apollo Medical Debt Burden Is Concerning

While all seems to be going quite well for Apollo Medical, the company is currently dealing with a substantial amount of debt behind the scenes.

Debt is almost always going to be present with any company, so it’s not an immediate red flag just because they have liabilities, but the concern comes from the way the debt is handled. Apollo Medical has the opportunity to take care of a lot of this debt with its current stock market success, and it remains to be seen if that will happen or not.

Beyond this, ApolloMed has also seen a lot of insider selling over the course of the last few months. With top investors selling off their shares in Apollo Medical, you can’t help but wonder what’s in store for the company that retail investors and traders just don’t know about.

It’s suspicious, to say the least, and could be a warning sign for potential investors to come. While neither of these risks are explicitly bad, they certainly are enough to make you stop and think for a moment before investing.

Is Apollo Medical Undervalued?

Even during this present high Apollo Medical is experiencing, optimistic analysts seem to agree that the company is still undervalued. Not only does this result in lower risk upon investing, but it could also bring a much better value for those who invest now compared to later when the price per share is increased.

Since December of 2020 alone, ApolloMed’s market cap has nearly quadrupled from $640 million to $2.34 billion — with no signs of slowing up anytime soon, either. All of this bodes extremely well for Apollo Medical and its valuation, making an already enticing investment opportunity all the better.

But pessimists will point to a more traditional discounted cash flow forecast analysis that pegs fair value at $36 per share, representing significant downside risk.

Is Apollo Medical Stock A Buy? The Bottom Line

Considering the lucrative nature of Apollo Medical’s business and its extremely promising earnings forecast, it seems the benefits of investing in Apollo Medical far outweigh the risks. This is further underscored by its undervaluation among optimistic analysts, making for one of the most attractive investment opportunities for retail investors and traders on the market today.

While there’s always the chance that these risks associated with Apollo Med could interfere with its projected success, all signs are pointing to continued growth and excellent returns for investors. In other words, Apollo Medical stock is currently a buy.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.