Home-care provider Gentiva (NASDAQ:GTIV) is in the business of taking care of people. As our population continues to age, Gentiva should have an ongoing opportunity to provide health care to ever more people in the convenience of their own homes.

Revenue in the fourth quarter climbed nearly 11%, while net income (after adjusting for gains, charges, and whatnot) grew about 15%. While Medicaid revenues were flat, commercial revenue grew almost 12%, and the Medicare business was up more than 18%.

Ironically, Medicare business is actually more profitable for Gentiva than commercial insurance business. Consequently, Gentiva is working hard to expand this. While increasing reliance on Medicare will subject Gentiva more to the whims and vagaries of reimbursement decisions, it will help Gentiva continue to grow at a double-digit clip.

That said, Gentiva clearly has more work to do on the operating side of the business. Gentiva's operating margins are quite low and below those of almost any comparable company in that industry.

By the same token, these low operating margins are also a potential source of opportunity. Just a 1% improvement in operating margins (at current revenue levels) could mean more than $0.20 a share in additional earnings.

Gentiva also boasts a very clean balance sheet, with no debt and more than $100 million in cash. While the company does repurchase a modest amount of stock, it is more likely that management will use cash and other resources to grow the business. Gentiva may be the largest home health-care provider in the country, but it still has only about 2-3% market share, and there are almost certainly opportunities for acquisitions.

Although Gentiva shouldn't be expected to post breathtaking growth, the valuation on these shares looks interesting. While the trailing P/E is a bit high at 24 (adjusting for gains and charges), the EV-to-FCF ratio is only about 11. Gentiva is not looking for much cash flow growth in 2005, but over the long haul, double-digit growth in free cash flow should be attainable. Consequently, these shares are at least worth a closer look at these levels.

Fool contributor Stephen Simpson, CFA, has no ownership interest in any stocks mentioned.