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

Profitability

This table compares HMS Holdings Corp and HealthSouth Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HMS Holdings Corp 6.37% 9.26% 5.81%
HealthSouth Corporation 6.69% 22.81% 5.49%

Valuation and Earnings

This table compares HMS Holdings Corp and HealthSouth Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
HMS Holdings Corp $496.01 million 3.20 $37.63 million $0.38 49.69
HealthSouth Corporation $3.71 billion 1.27 $247.60 million $2.75 17.47

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

Analyst Ratings

This is a summary of recent recommendations and price targets for HMS Holdings Corp and HealthSouth Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HMS Holdings Corp 0 2 5 1 2.88
HealthSouth Corporation 1 2 5 0 2.50

HMS Holdings Corp presently has a consensus target price of $23.06, suggesting a potential upside of 22.15%. HealthSouth Corporation has a consensus target price of $51.71, suggesting a potential upside of 7.63%. Given HMS Holdings Corp’s stronger consensus rating and higher possible upside, research analysts clearly believe HMS Holdings Corp is more favorable than HealthSouth Corporation.

Institutional and Insider Ownership

93.1% of HMS Holdings Corp shares are held by institutional investors. Comparatively, 93.1% of HealthSouth Corporation shares are held by institutional investors. 3.2% of HMS Holdings Corp shares are held by insiders. Comparatively, 1.6% of HealthSouth Corporation shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk & Volatility

HMS Holdings Corp has a beta of 0.94, meaning that its share price is 6% less volatile than the S&P 500. Comparatively, HealthSouth Corporation has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Dividends

HealthSouth Corporation pays an annual dividend of $1.00 per share and has a dividend yield of 2.1%. HMS Holdings Corp does not pay a dividend. HealthSouth Corporation pays out 36.4% of its earnings in the form of a dividend. HMS Holdings Corp has raised its dividend for 3 consecutive years.

Summary

HMS Holdings Corp beats HealthSouth Corporation on 10 of the 17 factors compared between the two stocks.

HMS Holdings Corp Company Profile

HMS Holdings Corp. is a holding company. The Company, through its subsidiaries, operates in the United States healthcare insurance benefit cost containment marketplace. It provides coordination of benefits services to government, and private healthcare payers and sponsors. Its payment integrity services ensure that healthcare claims billed are accurate and appropriate. It offers services to state Medicaid agencies, government health agencies and health plans, including Medicaid managed care, Medicare Advantage and group and individual health lines of business; government and private employers; and other healthcare payers and sponsors, including child support agencies. It serves approximately 45 state Medicaid programs and the District of Columbia, and government health agencies, including Centers for Medicare & Medicaid Services (CMS) and the Veterans Health Administration (VHA). It also provides services to approximately 250 health plans and supports their multiple lines of business.

HealthSouth Corporation Company Profile

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.

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