Critical Contrast: American Renal Associates (ARA) vs. MEDNAX (MD)

American Renal Associates (NYSE: ARA) and MEDNAX (NYSE:MD) are both medical companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, earnings, valuation, profitability, dividends, institutional ownership and analyst recommendations.

Valuation & Earnings

This table compares American Renal Associates and MEDNAX’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Renal Associates $749.77 million 0.75 -$380,000.00 ($0.33) -54.33
MEDNAX $3.18 billion 1.47 $324.91 million $2.83 17.63

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

Profitability

This table compares American Renal Associates and MEDNAX’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Renal Associates -2.15% 15.80% 2.34%
MEDNAX 7.76% 10.80% 5.57%

Institutional and Insider Ownership

93.5% of American Renal Associates shares are owned by institutional investors. Comparatively, 98.7% of MEDNAX shares are owned by institutional investors. 12.6% of American Renal Associates shares are owned by company insiders. Comparatively, 2.4% of MEDNAX shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk and Volatility

American Renal Associates has a beta of 3.55, suggesting that its share price is 255% more volatile than the S&P 500. Comparatively, MEDNAX has a beta of 0.31, suggesting that its share price is 69% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for American Renal Associates and MEDNAX, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Renal Associates 0 0 4 0 3.00
MEDNAX 1 8 3 0 2.17

American Renal Associates currently has a consensus target price of $20.00, suggesting a potential upside of 11.54%. MEDNAX has a consensus target price of $54.27, suggesting a potential upside of 8.78%. Given American Renal Associates’ stronger consensus rating and higher probable upside, equities research analysts plainly believe American Renal Associates is more favorable than MEDNAX.

American Renal Associates Company Profile

American Renal Associates Holdings, Inc. is a dialysis service provider in the United States focused on joint venture (JV) partnerships with physicians. As of December 31, 2016, the Company owned and operated 214 dialysis clinics in partnership with 379 nephrologist partners treating over 14,000 patients in 25 states and the District of Columbia. The Company operates its dialysis clinics exclusively through a JV model, in which it partners primarily with local nephrologists to develop, own and operate dialysis clinics, while the providers of the majority of dialysis services in the United States operate through a combination of subsidiaries and joint ventures. It provides patient care and clinical outcomes to patients suffering from end-stage renal disease (ESRD). Its clinics offer both in center and home dialysis options to meet the needs of patients. Its clinics primarily provide in center hemodialysis treatments and ancillary items and services.

MEDNAX Company Profile

MEDNAX, Inc. is a provider of physician services, including newborn, anesthesia, maternal-fetal, teleradiology, pediatric cardiology and other pediatric subspecialty care. As of December 31, 2016, the Company’s national network consisted of over 3,600 affiliated physicians, including over 1,130 physicians providing neonatal clinical care, in 35 states and Puerto Rico, primarily within hospital-based neonatal intensive care units (NICUs), to babies born prematurely or with medical complications. As of December 31, 2016, the Company had over 1,390 affiliated physicians providing anesthesia care to patients in connection with surgical and other procedures, as well as pain management. As of December 31, 2016, the Company had 270 affiliated physicians providing maternal-fetal and obstetrical medical care to expectant mothers experiencing complicated pregnancies primarily in areas where its affiliated neonatal physicians practice.

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