Will Addus HomeCare (NASDAQ:ADUS) latest volatility spike continue?

Addus HomeCare is currently generating 0.4711% in daily expected returns and assumes 3.451% risk (volatility on return distribution) over the 90 days horizon. While some of us are excited about healthcare space, it makes sense to sum up Addus HomeCare in greater detail to make a better estimate of its risk and reward. We will cover the possibilities of Addus HomeCare's current volatility to continue through September. Addus HomeCare's seemingly stabilizing volatility may still impact the value of the stock as we estimate Addus HomeCare as currently overvalued. The real value, based on our calculations, is getting close to 87.53 per share.
Published over a year ago
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Reviewed by Michael Smolkin

Addus HomeCare currently holds roughly 239.61 M in cash with 16.61 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 15.55.
Volatility is a rate at which the price of Addus HomeCare or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Addus HomeCare may increase or decrease. In other words, similar to Addus's beta indicator, it measures the risk of Addus HomeCare and helps estimate the fluctuations that may happen in a short period of time. So if prices of Addus HomeCare fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is Addus HomeCare's Liquidity

Addus HomeCare financial leverage refers to using borrowed capital as a funding source to finance Addus HomeCare ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Addus HomeCare financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Addus HomeCare's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Addus HomeCare's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Addus HomeCare's total debt and its cash.

Addus HomeCare Volatility Drivers

Addus HomeCare unsystematic risk is unique to Addus HomeCare and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Addus HomeCare you can also buy Definitive Healthcare Corp. You can also mitigate this risk by investing in the health care sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Addus HomeCare important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Addus HomeCare income statement and balance sheet. Here are more details about Addus volatility.
0.710.940.990.960.710.720.960.980.980.940.850.02-0.07-0.130.5-0.260.27
0.710.890.780.790.250.750.760.680.720.680.72-0.290.16-0.63-0.1-0.710.56
0.940.890.960.960.590.780.930.920.940.910.84-0.06-0.03-0.370.27-0.480.35
0.990.780.960.950.660.810.970.980.990.960.85-0.04-0.04-0.260.37-0.390.27
0.960.790.960.950.630.620.920.910.920.870.84-0.04-0.01-0.180.48-0.310.42
0.710.250.590.660.630.380.670.720.70.680.640.67-0.630.180.560.1-0.33
0.720.750.780.810.620.380.780.780.810.830.7-0.180.03-0.58-0.1-0.650.14
0.960.760.930.970.920.670.780.950.950.940.87-0.03-0.03-0.30.34-0.420.26
0.980.680.920.980.910.720.780.951.00.970.830.04-0.1-0.120.46-0.250.18
0.980.720.940.990.920.70.810.951.00.970.850.01-0.09-0.170.42-0.290.21
0.940.680.910.960.870.680.830.940.970.970.820.02-0.05-0.220.36-0.330.09
0.850.720.840.850.840.640.70.870.830.850.82-0.03-0.05-0.240.42-0.340.31
0.02-0.29-0.06-0.04-0.040.67-0.18-0.030.040.010.02-0.03-0.920.350.220.39-0.72
-0.070.16-0.03-0.04-0.01-0.630.03-0.03-0.1-0.09-0.05-0.05-0.92-0.21-0.15-0.260.57
-0.13-0.63-0.37-0.26-0.180.18-0.58-0.3-0.12-0.17-0.22-0.240.35-0.210.670.98-0.23
0.5-0.10.270.370.480.56-0.10.340.460.420.360.420.22-0.150.670.570.06
-0.26-0.71-0.48-0.39-0.310.1-0.65-0.42-0.25-0.29-0.33-0.340.39-0.260.980.57-0.32
0.270.560.350.270.42-0.330.140.260.180.210.090.31-0.720.57-0.230.06-0.32
Click cells to compare fundamentals

Detailed Outlook On Addus HomeCare

The latest price spike of Addus HomeCare could raise concerns from retail investors as the firm closed today at a share price of 95.02 on 80,319 in volume. The company directors and management may have good odds in positioning the firm resources to exploit market volatility in September. The stock standard deviation of daily returns for 30 days investing horizon is currently 3.45. The above-average risk is mostly attributed to market volatility and speculations regarding some of the upcoming earning calls from Addus HomeCare partners.
 2017 2018 2019 2020 (projected)
Accounts Payable4.27 M12.24 M11.01 M11.88 M
Receivables89.5 M110.26 M99.23 M87.46 M

Addus HomeCare has 71 percent chance to slump way below $94 in September

The mean deviation is down to 2.23 as of today. Addus HomeCare currently demonstrates below-verage downside deviation. It has Information Ratio of 0.05 and Jensen Alpha of 0.18. However, we do advice investors to further question Addus HomeCare expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk.

Our Final Take On Addus HomeCare

While some companies in the medical care facilities industry are either recovering or due for a correction, Addus may not be as strong as the others in terms of longer-term growth potentials. With an impartial outlook on the current market volatility, it may be better to hold off any inventment activity and neither purchase nor short any shares of Addus HomeCare at this time. The Addus HomeCare risk-reward trade off is not appealing enough to do any trading. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Addus HomeCare.

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