Financial Survey: HealthSouth (HLS) & HealthStream (HSTM)

HealthSouth (NYSE: HLS) and HealthStream (NASDAQ:HSTM) are both medical companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, analyst recommendations, risk, institutional ownership and dividends.

Institutional and Insider Ownership

93.4% of HealthSouth shares are held by institutional investors. Comparatively, 74.4% of HealthStream shares are held by institutional investors. 1.6% of HealthSouth shares are held by insiders. Comparatively, 21.1% of HealthStream shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for HealthSouth and HealthStream, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HealthSouth 1 2 6 0 2.56
HealthStream 0 4 2 0 2.33

HealthSouth currently has a consensus price target of $51.71, suggesting a potential upside of 4.75%. HealthStream has a consensus price target of $24.40, suggesting a potential upside of 8.59%. Given HealthStream’s higher probable upside, analysts plainly believe HealthStream is more favorable than HealthSouth.

Valuation & Earnings

This table compares HealthSouth and HealthStream’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HealthSouth $3.71 billion 1.31 $247.60 million $2.75 17.95
HealthStream $225.97 million 3.17 $3.75 million $0.18 124.84

HealthSouth has higher revenue and earnings than HealthStream. HealthSouth is trading at a lower price-to-earnings ratio than HealthStream, indicating that it is currently the more affordable of the two stocks.

Dividends

HealthSouth pays an annual dividend of $1.00 per share and has a dividend yield of 2.0%. HealthStream does not pay a dividend. HealthSouth pays out 36.4% of its earnings in the form of a dividend. HealthStream has raised its dividend for 3 consecutive years.

Profitability

This table compares HealthSouth and HealthStream’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HealthSouth 6.69% 22.81% 5.49%
HealthStream 2.36% 2.46% 1.79%

Volatility and Risk

HealthSouth has a beta of 0.54, meaning that its share price is 46% less volatile than the S&P 500. Comparatively, HealthStream has a beta of 0.9, meaning that its share price is 10% less volatile than the S&P 500.

Summary

HealthSouth beats HealthStream on 10 of the 17 factors compared between the two stocks.

About HealthSouth

HealthSouth Corporation (HealthSouth) is a provider of post-acute healthcare services, offering both facility-based and home-based post-acute services in 35 states and Puerto Rico through its network of inpatient rehabilitation hospitals, home health agencies and hospice agencies. The Company manages its operations through segments, including inpatient rehabilitation, and home health and hospice. It is an owner and operator of inpatient rehabilitation hospitals. It provides specialized rehabilitative treatment on both an inpatient and outpatient basis. It offers its home health and hospice services through Encompass Home Health and Hospice business (Encompass). Encompass operates home health and hospice agencies in 25 states, with concentrations in the Southeast, Oklahoma, and Texas. As of December 31, 2016, the Company operated 123 inpatient rehabilitation hospitals. As of December 31, 2016, the Company managed five inpatient rehabilitation units through management contracts.

About HealthStream

HealthStream, Inc. (HealthStream) provides workforce, patient experience and provider solutions for healthcare organizations. The Company operates in three segments: HealthStream Workforce Solutions, HealthStream Patient Experience Solutions and HealthStream Provider Solutions. HealthStream’s products and services are organized into three segments: Workforce Solutions, Patient Experience Solutions, and Provider Solutions. HealthStream’s solutions are provided to a range of customers within the healthcare industry across the continuum of care. Delivered primarily as Software-as-a-Service (SaaS), the Company’s solutions focus on challenges facing the healthcare workforce and healthcare organizations, including the need to manage, retain, engage and develop healthcare workforce talent; meet compliance requirements; manage ongoing medical staff credentialing and privileging processes, and deliver patient experiences of care in healthcare organizations.

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