Over the last six months, AdaptHealth’s shares have sunk to $9, producing a disappointing 12.9% loss - a stark contrast to the S&P 500’s 24.7% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in AdaptHealth, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is AdaptHealth Not Exciting?

Even though the stock has become cheaper, we're swiping left on AdaptHealth for now. Here are three reasons we avoid AHCO and a stock we'd rather own.

1. Lackluster Revenue Growth

We at StockStory place the most emphasis on long-term growth, but within healthcare, a stretched historical view may miss recent innovations or disruptive industry trends. AdaptHealth’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.7% over the last two years was well below its five-year trend.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for AdaptHealth, its EPS declined by 1.1% annually over the last five years while its revenue grew by 35.5%. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, AdaptHealth’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

AdaptHealth isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 7.8× forward P/E (or $9 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

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