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Here's Why Seasoned Investors are Retaining Mednax (MD)

Mednax Inc. MD has been in investors’ good books for a while owing to its strategic initiatives and an increasing top line on the back of operational efficiency along with solid segments. Its business streamlining efforts and booming telehealth services are other tailwinds.

MD is well-poised for progress, evident from its  VGM Score  of B. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.

Now let’s see why this currently Zacks Rank #3 (Hold) player is an investor favorite now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

With a market capitalization of $2.3 billion, Mednax has a strong inorganic growth story. Its notable buyouts date back to that of vRad in 2015 that helped Mednax expand its services in telemedicine. In 2019, MD closed its buyouts of nine physician group practice acquisitions, including two neonatology physician practices, two maternal-fetal physician practices, one radiology practice and four other paediatric subspecialty practices. In 2020, it bought one paediatric subspecialty practice for $2.1 million.

This leading hospital company continued with its buyout spree in 2021 as well. We believe that all these acquisitions poise Mednax well for growth.

Mednax is leaving no stone unturned when it comes to streamlining its portfolio. Its MedData divestiture in 2019 and American Anesthesiolog divestiture in 2020 helped it focus on its core business. MD also sold MEDNAX Radiology Solutions to focus on its core paediatrics and obstetrics business lines.

MD made investments in telehealth, which gained a substantial response amid the COVID-19 environment. Demand for telemedicine is expected to continue, given its efficiency and popularity. This, in turn, will diversify Mednax’s revenue sources and increase profitability.

All these initiatives have helped MD witness revenue growth over the past several years. In the first nine months of 2021, revenues increased 7.2% year over year.

However, its weak capital position due to rising debt level remains a headwind.

Is Further Upside Left?

We expect Mednax to continue performing well on the back of a solid pipeline of activities and streamlined business.

MD’s long-term growth rate stands at 11.6%, higher than the industry's average of 9.8%.

Shares of Mednax have rallied 16.9% in a year compared with the industry’s growth of 32.6%.

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks in the same space are Zoetis Inc. ZTS, Molina Healthcare, Inc. MOH and PaciraBioSciences, Inc. PCRX.

Zoetis has a diversified business and is a leader in the animal health space. ZTS came up with a trailing four-quarter surprise of 12.7%, on average. ZTS currently has a Zacks Rank #2 (Buy).

Molina Healthcare Inc. is a multi-state managed care organization, participating exclusively in government-sponsored healthcare programs. MOH’s earnings surpassed estimates in three of its trailing four quarters (missing the mark in one), the average surprise being 4%. MOH has a Zacks Rank of 2 at present.

PaciraBioSciences, based in Parsippany, NJ, is a specialty pharmaceutical company focused on developing, commercializing and manufacturing proprietary pharmaceutical products, primarily for use in hospitals and ambulatory surgery centers. PCRX’s bottom line for 2021 is expected to jump 30.3% year over year. PCRX beat on earnings thrice in the last four quarters and missed on the same once, delivering an average earnings surprise of 1.6%. PCRX presently sports a Zacks Rank of 1.

Shares of ZTS and MOH have gained 28.1% and 24%, respectively, in a year’s time while the PCRX stock has lost 15%.
 


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