Hanger Orthopedic Group Inc. (HGR) is expected to grow earnings at 15% over the next five years. The company saw revenues rise 6.8% year over year in the second quarter in a tough economic environment. HGR doesn’t just have growth, it also has value. The company trades with a PEG ratio of 0.90.
Company Description
Hanger Orthopedic Group operates 671 patient care centers specializing in orthotics and prosthetics as well as distribution centers in 45 states and the District of Columbia.
The company also operates two other business units, Linkia, which provides network management for the orthotics and prosthetics industry, and Innovative Neurotronics, which provides independent research in neuromuscular technologies.
Revenues Jumped 6.8% Year Over Year
On July 28, Hanger Orthopedic Group surprised on the second quarter Zacks Consensus Estimate by 14.81%. It was the third beat out of the last four quarters.
Earnings per share were 31 cents, 24% higher than the 25 cents from the year ago period. Analysts expected 27 cents.
Sales rose 6.8% to $193.5 million form $181.2 million in the same quarter in 2008. The gain was mainly the result of a 4.4% increase in same-center sales in the patient care centers and a 4.2% increase in the sales of the Company’s distribution segment.
The growth in the patient care centers continues to be the main driver of growth. Margins have improved by 70 basis points to 12.5% since the second quarter of last year.
Financials
As of June 30, 2009, the company had total liquidity of $114.1 million, with $76.4 million in cash and $37.7 million available under its revolving credit facility. It’s total debt was $426.4 million, with 21.6%, or $91.9 million, subject to variable interest rates.
Raised 2009 Guidance
Given the solid second quarter, and first half results, the company raised its 2009 earnings per share guidance to the range of $1.02 to $1.04 from its prior forecast of 96 cents to 98 cents. Sales are expected to be the same, between $750 and $760 million.
Full Year Zacks Consensus Estimate Rises
Analysts have been consistent on estimates for the third quarter, as they’ve held at 27 cents the last 90 days.
But the full-year Zacks Consensus Estimate has risen by 5 cents to $1.02 with 4 out of 5 covering analysts raising as the analysts moved to get in-line with the company’s guidance range. Analysts expect year over year earnings growth in 2009 of 29.62%.
Value Fundamentals
Hanger Orthopedic Group is a Zacks #1 Rank (strong buy) stock. It is trading at 13.9x forward earnings and has a price-to-book ratio of 1.53. The company also has a solid 5-year return on equity (ROE) of 10.27%.
