The Merriam-Webster dictionary defines odyssey as "a long wandering or voyage usually marked by many changes of fortune." For hospice care provider Odyssey Healthcare
Odyssey announced today that President and CEO David Gasmire had resigned because the company needed to "take quick action to put us back on a steady track." Those are odd words for a company that in August reported that quarterly sales had risen 34% and earnings were up 25%.
The announcement goes on to say the company expects to announce earnings for the recently reported quarter of $0.24 a share -- well below the $0.27 analysts were expecting, but up from $0.21 last year. When was the last time you saw a CEO resignation over rising earnings?
Odyssey says it had "weak admissions and patient census in selected markets" and said it would earn up to $0.96 a share this year -- up from $0.84 last year but shy of the company's guidance of up to $1.05 a share.
Making this press release especially noteworthy is the "unrelated announcement" (yeah, right) of a Department of Justice (DOJ) investigation of the company under the False Claims Act. DOJ is looking at payments submitted from January 1, 2002, to the present.
Wall Street hated the news and sent the stock down 43% -- the largest percentage loss on the Nasdaq today. Talk about a reversal of fortune.
For those looking at Odyssey as an investment, the company is trading at 12 times 2004 earnings -- far below the 18 times of more broadly diversified competitor Manor Care
Is Odyssey the Ulysses of the health-care industry's fallen angels? Merck
If it were not for the DOJ investigation, Odyssey would be a downright bargain. But resignations and investigations tend to be warning signs and, for that reason, this odyssey is worth watching with your investment dollars firmly tucked away in your wallet.
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Fool contributor W.D. Crotty does not own stock in any of the companies mentioned but loves to write about the risks in this industry ensnarled in government bureaucracy.