WebMD, a Healthy M&A Target?
|Written by GSCR Staff|
|Thursday, 27 October 2016 06:06|
In Monday’s Guide, we discussed the coming deal with Time Warner (NYSE—TMX) and AT&T (NYSE—ATT) and how it could be a catalyst for coming media deals. The presidential election is now 12 days away and this week it was announced that 2017 premiums for Obamacare will more than double. This has been political fodder for the GOP, especially candidate Trump. We have decided to look in the healthcare space for a potential deal in 2017. Why? There is no doubt if Trump gets elected and the Republicans maintain control of Congress, repeal and replace will be at the top of the 100-day agenda. We also believe a President Clinton will try and work out something in the way of a compromise on this area, at least to start out the administration on solid footing.
WebMD Health Corporation (NASDAQ – WBMD - $51.82) is a little out of our normal price and market cap range, but we believe could be a solid play on the healthcare front. Below, the chart illustrates the one year performance of the stock which indicates it is now trading over the 25-day EMA and appears to be gaining momentum for another accumulation run.
WBMD 1-Year, 25-Day EMA
WebMD is a solidly innovative Company merging technology and healthcare providing health information services to consumers, physicians and other healthcare professionals, employers, and health plans through its public and private online portals, mobile platforms, and health-focused publications in the United States. Its primary public portal is WebMD.com, which enables consumers to obtain information on health and wellness topics or on a disease or condition; assess personal health status; use online trackers, tools, and quizzes; locate physicians; receive periodic e-mailed newsletters and alerts on topics of individual interest; and participate in online communities with peers and experts. The Company’s public portal, Medscape.com also enables physicians and healthcare professionals to access clinical reference sources; stay abreast of the latest clinical information; learn about new treatment options; earn continuing medical education credit; and communicate with peers. It also offers private portals and related services under the WebMD Health Services brand.
This first statistic we like, particularly when it comes to M&A is EBITDA versus Enterprise Value. WebMD currently has a low value of 12. Back on the technical side, the short float is under 5%. Additionally, margins are impressive as well. A profit margin of 11% and operating margin of 21% are well above industry averages. Finally, we have been stressing performance lately, and the Company has hit or surpassed EPS estimates four straight quarters.
In summary, we believe WBMD is a solid stock with a great chance to take off in 2017 given healthcare reform will be another top priority. Set target of $65 for next year.
Have a great day!
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