Gentiva Health Services Shares Plunged: What You Need to Know

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of home-health-care specialist Gentiva Health Services (NAS: GTIV) are nose-diving 16% today following reports that Congress has apparently reached a deal to avert the looming debt-ceiling crisis.

So what: The worry is that the outlined debt-reduction package is going to sack the health-care sector, including home-health-care providers. Social Security, Medicaid, and veterans' benefits are protected from automatic reductions, but companies that receive payments from Medicare could be facing a serious pinch later this year when payments would be scheduled to drop by 11%. Gentiva is one of those companies, along with myriad other health-care companies taking it on the chin today.

Now what: I don't feel it's ever too early to be skeptical about a stock, but short-sellers may be jumping the gun on a relatively well-run company. Again, we have a lot of unanswered questions as to exactly how much we might see in spending cutbacks for Medicare, but Gentiva's forward P/E of 5.6, and the fact that it now trades well below its book value, makes it an attractive company to watch. With larger rival Amedisys (NAS: AMED) also valued at just 8.3 times forward earnings, this could be a seriously undervalued sector.

Craving more input? AddGentiva Health Servicesto your watchlist!

At the time this article was published Fool contributorSean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLongTry any of our Foolish newsletter servicesfree for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners