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Why Nobilis Health Is Skyrocketing 19% Today

By Todd Campbell - May 13, 2016 at 11:18AM

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The company has filed its previously delayed 10-Q with the SEC.

What: After reporting on May 11 that it was delaying the filing of its quarterly financials with the SEC, and then filing those documents last night, shares of Nobilis Health (HLTH) are surging higher by 18.6% at 11:00 a.m. EDT today. 

So what: The operator of outpatient surgery facilities surprised investors with a bigger than expected first-quarter loss on Tuesday, and then surprised them again by reporting that it was delaying the filing of its 10-Q with the SEC until it received guidance on "two narrow, non-cash accounting entries" contained in its report.

Last night, management filed its 10-Q with the SEC, assuaging investor concern that a delay could stretch out longer if accountants determined that Nobilis Health's treatment of those entries was incorrect.

In its press release announcing the filing, Nobilis Health didn't offer up additional insight into the entries in question or provide additional insight on any response it received from its accountants, so it appears there aren't any objections by auditors. 

Now what: The filing of its financials removes uncertainty, and investors are applauding that mightily today. However, investors may want to rein in a little of their enthusiasm given the company's first-quarter results.

Because of spending on technology and infrastructure, Nobilis Health posted a loss of $0.07 per share last quarter that was $0.08 worse than industry watchers were anticipating. On the flip side, the company also reported that sales grew 35% to a record $51.3 million. 

Given its sales growth, investors may be willing to assume that spending will decline as a percentage of revenue, providing future earnings upside. If the company's increased spending is a one-time event, then that's not a bad bet. However, given the volatility in this stock lately, it may be best to stay on the sidelines for another quarter or two to see if that's truly the case.

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