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No. of Recommendations: 1

I've done quite a lot of work on LHCG, actually. I probably saw the same attractive attributes you did.

The problem with running a MUE reverse DCF on LHCG is that it doesn't quite capture what is going on in the industry, namely:

* The changing revenue dynamic (lowered medicare reimbursement)
* Higher expesne structure due to face to face requirements
* Higher ongoing expenses related to reporting and oversight

Given that these things will have a meaningful impact on gross and operating margins, free cash flow will look considerably different in 2011 than it did in 2010. So using 2010 as a base year is problematic.

The other things that deterred me from biting on LHCG (to name a few) were:

* The industry is a pure price-taker industry
* The industry is acquisition dependent
* Less-than ethical industry participants will attract value-destroying legislation

Other than that, I think LHCG is clearcly the best operator in the industry, and its differentiated strategy gives it a leg up.

Just my thoughts,

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