Civitas Gets a Buy Rating from Canaccord Genuity

Canaccord Genuity analyst Richard Close maintained a Buy rating on Civitas (NYSE: CIVI) yesterday and set a price target of $19. The company’s shares opened today at $15.25.

Close wrote:

“We maintain our BUY and $19 PT following a relatively in-line 2QFY’18. There were some puts and takes with the report, which in our opinion seem to balance each other out. On the one hand, top-end of adj-EBITDA guidance was lowered due to investments in employee retention, while on the other hand a new cost-reduction initiative was announced. All in all, our BUY rating remains predicated on valuation: we continue to believe that at 7.2x CY’18E EBITDA CIVI offers a solid value play in healthcare services. Key positive: A new cost-reduction program was implemented, whereby the company will be closing (or selling) underperforming programs (mostly in I/DD and SRS). Key negative: Adj-EBITDA guidance was lowered (less than we expected) at the top-end due to the $4M investment in employee compensation (i.e., retention).”

According to TipRanks.com, Close is a 5-star analyst with an average return of 12.0% and a 58.4% success rate. Close covers the Services sector, focusing on stocks such as Envision Healthcare, Hms Holdings Corp, and Evolent Health.

Civitas has an analyst consensus of Moderate Buy, with a price target consensus of $19.

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Based on Civitas’ latest earnings release for the quarter ending March 31, the company reported a quarterly GAAP net loss of $2.49 million. In comparison, last year the company had a net profit of $5.48 million.

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Civitas Solutions, Inc. engages in the provision of home and community-based health and human services to individuals with intellectual, developmental, physical, and behavioral disabilities. It operates through the following business segments: Intellectual and Developmental Disabilities (I/DD); Post-Acute Specialty Rehabilitation Services (SRS); At-Risk Youth (ARY); and Corporate and Other. The I/DD segment includes residential support, day habilitation, vocational services, case management, crisis intervention, and hourly support care. The SRS segment delivers health care and community-based health and human services to individuals who have suffered acquired brain injury, spinal injuries, and other catastrophic injuries and illnesses. The ARY segment offers therapeutic foster care, family preservation, adoption services, early intervention, school-based services, and juvenile offender programs. The Corporate and Other segment relates to the results of the adult day health operating segment and unallocated home office expenses and stock-based compensation expense. The company was founded in 1980 and is headquartered in Boston, MA.