Here's Why Option Care Health (NASDAQ:OPCH) Has Grabbed Investors' Attention

For beginners, it may seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a revenue and profit history. But as Peter Lynch said in Ahead of Wall Street“Long-term hits almost never pay off.” Even though a well-financed company can sustain losses for years, it will have to turn a profit eventually, or investors will move on and the company will wither.

If this type of business is not your style, you like businesses that generate revenue, and even make a profit, then you might be interested in Health Care Option (NASDAQ: OPCH). While profit is not the only metric to consider when investing, it is worth recognizing companies that can consistently produce it.

Check out our latest analysis for Option Care Health

Option Care Health Benefits Improvement

Over the past three years, Option Care Health has grown its earnings per share (EPS) at an impressive rate from a relatively low base, which translates into a three-year percentage growth rate that isn’t particularly indicative of expected future performance. Therefore, we’ll focus on the growth over the past year instead. Impressively, Option Care Health’s EPS has grown from $0.88 to $1.57 over the past year. A 78% year-over-year growth is certainly a sight to behold.

It’s often useful to look at EBIT (earnings before interest and taxes) margins, as well as revenue growth, to get another feel for the quality of the company’s growth. While we note that Option Care Health achieved similar EBIT margins to last year, revenue increased 9.6% to US$4.4b. That’s encouraging news for the company!

The graph below shows how the company’s financial results and revenues have changed over time. For more details, click on the image.

In investing, as in life, the future matters more than the past. So why not take a look at this free interactive visualization of Option Care Health forecast benefits?

Are Option Care Health Insiders Aligned With All Shareholders?

They say there’s no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market on fire. This view is based on the possibility that stock purchases signal a rise in the buyer’s share. However, insiders are sometimes wrong, and we don’t know exactly the logic behind their acquisitions.

While we have seen a few insider sales (worth US$63k), these have been overshadowed by a mountain of purchases, totalling US$3.2m in just one year. This adds to the interest in Option Care Health as it suggests that those who understand the business best are bullish. We also note that it was the independent non-executive chairman of the board, Harry M. Kraemer, who made the largest single acquisition, paying US$1.9m for shares at around US$34.63 each.

Aside from insider buying, another encouraging sign for Option Care Health is that insiders, as a group, hold a considerable stake in the stock. In fact, their stake is valued at US$33m. This shows significant buy-in and may indicate conviction in the business strategy. While this only represents about 0.6% of the company, it is enough money to indicate alignment between the company’s management and common shareholders.

Should you add Option Care Health to your watch list?

Option Care Health’s earnings per share growth has been increasing at a healthy pace. Additionally, insiders have a significant stake in the company and have been buying more shares. These factors seem to indicate the company’s potential and that it has reached an inflection point. We suggest that Option Care Health be at the top of your watchlist. However, be aware that Option Care Health is posting 3 Warning Signs in Our Investment Analysis and one of them is a little disturbing…

The good news is that Option Care Health isn’t the only stock that has been the subject of insider buying. Here’s a list of undervalued small companies in the United States that have been the subject of insider buying in the last three months!

Please note that insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to constitute financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. Our goal is to provide you with focused, long-term analysis based on fundamental data. Please note that our analysis may not factor in the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.

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