Hanger Orthopedic Group, Inc. - Value

Patient care centers are the wave of the future for the health care industry as the population ages. Hanger Orthopedic Group, Inc. (HGR) is expanding by acquisition even as its own revenue grew 7.5% in the quarter ending Sep 30.

Hanger Acquiring ACP

On Oct 18, Hanger announced it was acquiring Accelerated Care Plus ("ACP") for $155 million in cash. ACP has no debt.

ACP is a sub-acute and long-term care rehabilitation provider and has contracts to service more than 4,000 of the 15,000 skilled nursing facilities ("SNF") nationwide, including with 22 out of the 25 largest national providers.

The acquisition will compliment Hanger's business line as a provider of orthotic and prosthetic patient care centers. It currently has 675 patient care centers in 45 states and D.C..

The deal is expected to close by the end of the year. Hanger expects it to be accretive to its 2011 financial results.

Earnings Expected to Grow By Double Digits in 2011

On Oct 27, Hanger reported quarterly results which surprised on the Zacks Consensus by 2 cents. Earnings per share were 37 cents compared to the consensus of 35 cents. Hanger had announced preliminary results on Oct 18 which were also 37 cents.

It was the third beat in four quarters for Hanger.

Revenue rose $14.5 million to $206.8 million. The quarter was boosted by a 4.1% increase in same-center sales in the patient care segment and a 10.5% gain in sales from the distribution segment.

Analysts are bullish on Hanger's outlook. Earnings are expected to grow by 16.5% in 2010 and 16.2% in 2011.

In the last 30 days, the 2011 Zacks Consensus has risen by 5 cents to $1.52 per share.

Still a Value Stock

Hanger continues to hold onto the designation of a value stock, but just barely. It is now trading at 14.7x forward estimates, which is just under the 15x cut-off I use to measure value.

Shares are nearing a 5-year high.

Given its strong growth outlook, however, it also trades with an attractive PEG ratio of 0.98.

Hanger is a Zacks #2 Rank (buy) stock.

Read the Mar 30, 2010 article.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

 
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