Healthcare Final Market Sector Review for 2016
With an exciting 2017 for healthcare quickly approaching, it is time for The Ambulatory M&A Advisor to present to its readers an end of the year Healthcare Sector Update. According to Duff & Phelps, a valuation and corporate finance advisory firm the latest November 2016 update presents some increases in numerous healthcare areas, and some significant decreases in others.
These reports are based on a closely monitored timeline of the various healthcare sectors and markets, and The Ambulatory M&A Advisor is dedicated to keeping its readers up to date on any financial changes in the healthcare field that could impact investment decisions in the new year.
Based on the most recent report presented by Duff & Phelps, as of November 2016, the S&P Healthcare Services Index has seen a recent decrease of 2.1 % since October. This decrease also displays that the Healthcare Services Index underperformed the S&P 500; an index that saw an increase of 3.4 % over the same studied period.
Best and Worst Performances in the Healthcare Sector
Over the recorded months of the sector study, results show that the best performances in healthcare were Pharmacy Management, Managed Care – Commercial, and Healthcare Staffing. Based on the findings of the report, Healthcare Starffing’s performance was influenced by Blackstone’s recent acquisition of TeamHealth.
According to the report, Healthcare Staffing is up by 15.5 %, with Pharmacy Management up 16.0 %, and Managed Care – Commercial up 15.7 %.
As usual in the market, not all numbers proved to be positive in the report. The worst performing sectors towards the end of 2016 were Diagnostic Imaging, which were down by 8.3 %, Assissted/Independent Living, down 16.3 %, and Healthcare REITS down by 8.3 %.
Current LTM Revenue and LTM EBITDA
Based on the reports, the current median LTM (Last Twelve Months) revenue and LTM EBITDA show multiples of 2.20X and 12.8X for the overall Healthcare Services Industry. These multiples show a slight increase from the August report where the multiples were respectively 1.7 X and 12.6X.
Sectors with the highest valuation multiples include “Other Services,” Consumer Directed Health and Wellness, HCIT, and Care Management/TPA.
Other Services lands on this section of the report for the third time in a row with LTM revenue of 1.76X and a LTM EBITDA of 19.1X. Although Other Services has landed on the highest valuation multiples list again, these numbers also represent a significant decrease from the August report that had an LTM EBITDA at 33.5.X.
Another second contender for highest multiples is Consumer Directed Health and Wellness. Currently, this sector shows 3.80X LTM revenue and 22.7X LTM EBITDA. This sector has also raised its LTM EBITDA from its August report of 21.9x EBITDA.
HCIT came in with high multiples with 5.23X LTM revenue, and 22.0X LTM EBITDA. These current multiples also reflect a mixture of increases and decreases since the August report.
As far as Care Management/TPA, the sector experienced 1.52X LTM Revenue, and 19.4X LTM EBITDA.
For a complete list of the results of the most recent Healthcare Sector Update, including detailed charts and graphs emphasizing changes in the market, view the full report here.
If you have an interest in learning more about the subject matter covered in this article, the M&A process or desire to discuss your current situation, please contact Blayne Rush, Investment Banker at 469-385-7792 or Blayne@AmbulatoryAlliances.com.