This Health Stock Is Feeling Robust

For a chain of clinics located in economically depressed New England, Advantage Health is in the pink. Bucking the slump in the health-care industry, its stock has zoomed to 18, up from 10 in December. What's the scoop?

Two things: Advantage Health runs the largest network of comprehensive medical-rehabilitation clinics in New England, "where demand for such facilities has been on the rise," says Kurt Kammerer, an analyst at Hartford-based Advest. And the company is a likely takeover target in the still-consolidating rehabilitation market, he adds. Advantage owns the 198-bed New England Rehabilitation Hospital, Woburn, Mass.--the nation's third-largest.

So Kammerer thinks Advantage is still undervalued. The stock could hit the mid-20s, he says, given the "company's competitive position, exceptional management, and operating track record." Kammerer expects earnings of $1.56 a share next year and $1.30 this year, up from 1993's $1.07.

One New York money manager sees the stock hitting 30 to 33 in a buyout deal. "Several of the big HMOs and rehabilitation companies have been eyeing Advantage," he says, including Healthsouth Rehabilitation. Advantage Chairman and CEO Ray Dunn confirms that it turned down an offer last year from Healthsouth because he expects Advantage to grow to $300 million in sales in 24 months. "So we deserve a higher price," says Dunn.

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