Investors looking for a strong, reasonably priced health-care company should take a look at repair and maintenance company Roto-Rooter
The company has a history of making venture capital investments and then reaping the long-term rewards. One such deal, Vitas, has grown into the largest hospice company in the U.S., and it has had rising net profits since 1998. Vitas has projected sales for 2004 of $490 million, which would be a 17% year-over-year increase.
On Friday, Roto-Rooter announced that it had entered into a definitive merger agreement to buy the 63% of Vitas it did not own for $410 million in cash. That purchase unleashed a flood of buying. From a closing price of $35.28 on Friday, Roto-Rooter stock went to a high of $52.80 on Monday -- a 50% gain.
However, Roto-Rooter may still not truly reflect the value of its soon-to-be-acquired health-care venture. Smaller hospice peers VistaCare
Roto-Rooter has, in recent quarters, been reducing debt and growing its well-known Roto-Rooter franchise. Although it will have to borrow to buy Vista, the company may plumb its acquisition for a greater reward via an initial public offering, something that failed in 1999. This time, though, Vista will be the growing market segment leader with multiple years of earnings growth -- and a great future.
Investors in Manor Care
Note to Jay Leno: There has to be a goldmine of material in a plumbing company providing end-of-life health care.