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Team Health Holdings (TMH)

Three analysts have increased their EPS estimates for this healthcare outsourcer in the past 30 days. The median price target is $49.38 per share.

Team Health Holdings (TMH)
From Cabot Benjamin Graham Value Investor Enterprising Model

Team Health Holdings (TMH) is a provider of outsourced healthcare professional staffing and administrative services to hospitals and other healthcare providers in the U.S.

The company’s Healthcare Staffing segment offers emergency medicine, anesthesia, specialty surgery and stand-in staffing. Team Health also provides healthcare service programs to users and providers of healthcare services on a fee-for-service, as well as a cost-plus or contract basis. Other services include hospital, military -and government healthcare staffing, transcribers, clinical services and nurse call-center operations. The company also offers billing, collection and healthcare consulting services. Team Health provides outsourced services to hospital emergency departments as well.

Jana Partners disclosed that it has taken an 8% position in Team Health, and will pursue an effort to land three Jana-friendly nominees to Team Health’s board of directors. (WSBI Editor’s Note: The three directors were appointed on March 23, 2016). Jana believes Team Health’s decision to reject a takeover proposal from AmSurg last year was a mistake. Team Health’s shareholders would have received $69.32 a share. TMH shares soared 17% after Jana’s announcement.

Team Health acquired IPC Healthcare, Brookhaven Anesthesia Associates and three other healthcare companies in 2015. Team Health will continue to pursue acquisitions in 2016 in keeping with its growth-by-acquisition strategy.

Team Health is able to provide outsourced physician services at lower cost, helping hospitals to reduce costs and increase flexibility. The Affordable Care Act is boosting demand from hospitals for Team Health’s services, evidenced by the 24% surge in the company’s revenues during the past 12 months. EPS climbed 13% during the past 12 months and will likely increase another 11% during the next 12 months to $3.07. Gains will receive a boost from recent purchases.

The company’s aggressive acquisition activity could boost results noticeably higher. Team Health’s 16.0 price to earnings ratio is reasonable, and the company’s 0.95 PEG ratio is one of the lowest in the Healthcare Services sector. Also, the company’s 31.9% return on equity is one of the highest in the sector.

TMH will likely rise 78% to my 78.67 Min Sell Price within two years. Buy at 47.66 or below.

J. Royden Ward, Cabot Benjamin Graham Value Investor Enterprising Model,, 978-745-5532, March 10, 2016