Option Care Health, Inc. (OPCH) Stock Analysis and Metrics

Sector: Healthcare Industry: Medical Care Facilities CIK: 0001014739

Market Cap 5.37 Bn

P/B 3.95

P/E 25.67

P/S 0.97

ROIC (Qtr) 9.59

Div Yield % 0.00

Rev 1y % (Qtr) 12.24

Total Debt (Qtr) 1.28 Bn

Debt/Equity (Qtr) 0.94

About

Option Care Health, Inc., often recognized by its ticker symbol OPCH, operates in the healthcare industry, specifically focusing on home and alternate site infusion services within the United States. The company was established in 2019, following the merger of HC Group Holdings II, Inc. and BioScrip, Inc., making it the largest independent provider of home and alternate site infusion services in the country, with a network of 177 locations spread across 43 states. Option Care Health's primary business activities revolve around providing infusion...

Option Care Health, Inc., often recognized by its ticker symbol OPCH, operates in the healthcare industry, specifically focusing on home and alternate site infusion services within the United States. The company was established in 2019, following the merger of HC Group Holdings II, Inc. and BioScrip, Inc., making it the largest independent provider of home and alternate site infusion services in the country, with a network of 177 locations spread across 43 states.

Option Care Health's primary business activities revolve around providing infusion services, which encompass a wide range of therapies for both chronic and acute conditions. These services are delivered to patients in the comfort of their homes or at one of the company's ambulatory infusion suites. The therapy offerings are diverse, including anti-infectives, nutrition support, chronic inflammatory disorders, neurological disorders, immunoglobulin therapy, and other treatments for various conditions. Additionally, the company provides therapies for pain management, chemotherapy, and respiratory medication, ensuring comprehensive care for its patients.

The home and alternate site infusion market is highly competitive, with Option Care Health facing rivals such as Optum Infusion Pharmacy, Coram CVS/specialty infusion services, Amerita Specialty Pharmacy, KabaFusion, and Soleo Health. However, the company maintains a competitive edge through its extensive national network, the broad spectrum of infusion services it provides, and its ability to offer convenient and comfortable treatment settings for patients.

In terms of revenue generation, Option Care Health primarily caters to managed care organizations, local and regional patient referral sources, and pharmaceutical manufacturers. The company's largest payer accounted for approximately 14% of its revenue in the year ending December 31, 2023, with no other single payer representing more than 10%. Furthermore, the company provides services that are directly reimbursable through government healthcare programs like Medicare and Medicaid.

Option Care Health's product and service portfolio includes home and alternate site infusion services, specialty pharmacy services, and pharmacy compounding services. The home and alternate site infusion services cater to patients with chronic and acute conditions, offering therapies in a convenient and comfortable setting, while specialty pharmacy services target patients with complex medical conditions, providing customized medications and clinical support. Pharmacy compounding services cater to patients requiring customized medications not commercially available.

Price action

Investment thesis

Bull case

Healthy cash reserves of 309.82M provide 10.24x coverage of short-term debt 30.25M, demonstrating strong liquidity position and minimal refinancing risk.
Robust free cash flow of 220.68M exceeds capital expenditure of 38M by 5.81x, indicating strong organic growth funding capability.
Operating cash flow of 258.68M fully covers other non-current liabilities 51.33M by 5.04x, showing strong long-term stability.
Robust tangible asset base of 1.85B provides 4.03x coverage of working capital 458.86M, indicating strong operational backing.
Tangible assets of 1.85B provide robust 11.16x coverage of other current liabilities 165.78M, indicating strong asset backing.

Bear case

Operating cash flow of 258.68M barely covers its investment activities of (158.64M), with a coverage ratio of -1.63, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
Cash reserves of 309.82M provide limited coverage of acquisition spending of (117.25M), which is -2.64x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
Operating cash flow of 258.68M is outpaced by equity issuance of (307.49M) (-0.84 ratio), indicating concerning reliance on equity markets for funding operations.
Tax assets of 0 provide limited offset against tax liabilities of 50.02M, which is 0x, indicating potential future cash flow pressure from tax obligations.
R&D investment of 0 represents just 0x of SG&A expenses of 675.04M, indicating potential underinvestment in innovation relative to administrative overhead.

Peer comparison

Companies in the Medical Care Facilities

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	HCA	HCA Healthcare, Inc.	114.88 Bn	18.11	1.54	46.35 Bn
2	THC	Tenet Healthcare Corp	18.07 Bn	13.34	0.87	13.19 Bn
3	UHS	Universal Health Services Inc	14.64 Bn	10.65	0.86	5.11 Bn
4	FMS	Fresenius Medical Care AG	14.10 Bn	16.69	0.61	14.98 Bn
5	EHC	Encompass Health Corp	12.55 Bn	19.95	2.17	2.66 Bn
6	ENSG	Ensign Group, Inc	10.08 Bn	30.72	2.09	2.16 Bn
7	DVA	Davita Inc.	8.90 Bn	11.53	0.67	12.78 Bn
8	CHE	Chemed Corp	6.38 Bn	22.87	2.52	0.14 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	1.82	1.26
EV to Cash from Ops. EV/CFO	24.49	12.78
EV to Debt EV to Debt	4.96	12.10
EV to EBIT EV/EBIT	18.90	10.74
EV to EBITDA EV/EBITDA	14.88	16.04
EV to Free Cash Flow [EV/FCF] EV/FCF	28.71	18.02
EV to Market Cap EV to Market Cap	1.19	432.64
EV to Revenue EV/Rev	1.15	2.77
Price to Book Value [P/B] P/B	3.90	-1.92
Price to Earnings [P/E] P/E	25.36	5.13

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	0.00	0.10
Dividend Payout Ratio % Div Payout % (Qtr)	0.00	-13.44
Dividend per Basic Share Div per Share (Qtr)	0.00	0.27
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	0.00	5.42
Interest Coverage Int. cover (Qtr)	6.36	-97.94

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex 1y % (Qtr)	8.23	-114.65
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	-35.86	65.22
Dividend Growth (1y) % Dividend Growth (1y) %	0.00	0.97
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	0.75	-46.98
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	5.65	75.97
EBIT Growth (1y) % EBIT 1y % (Qtr)	0.93	-61.19
EBT Growth (1y) % EBT 1y % (Qtr)	0.34	-115.48
EPS Growth (1y) % EPS 1y % (Qtr)	4.13	-24.32
FCF Growth (1y) % FCF 1y % (Qtr)	-25.66	309.51
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	8.23	17.88

Liquidity Ratios	Value	Ind Avg
Asset Utilization Ratio Asset Util Ratio (Qtr)	1.59	1.04
Cash Payout Ratio Cash Payout (Qtr)	0.00	0.04
Cash Ratio Cash Ratio (Qtr)	0.38	0.39
Current Ratio Curr Ratio (Qtr)	1.56	1.39
Debt to Equity Ratio Debt/Equity (Qtr)	0.94	-13.19
Interest Cover Ratio Int Coverage (Qtr)	6.36	-97.94
Times Interest Earned Times Interest Earned (Qtr)	6.36	-97.94

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	7.70	-95.81
EBIT Margin % EBIT Margin % (Qtr)	6.06	-94.97
EBT Margin % EBT Margin % (Qtr)	5.11	-105.60
Gross Margin % Gross Margin % (Qtr)	19.40	23.31
Net Profit Margin % Net Margin % (Qtr)	3.80	-106.14

Option Care Health, Inc. (NASDAQ: OPCH)

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