Growing demand for at-home and alternate-site medical services is boosting Option Care Health's bottom line. The stock could pop. By Dan Victor

For millions of people living with chronic disease or acute illness, the choice to receive treatment anywhere other than a hospital is an easy one.

Option Care Health is capitalizing on the growing demand for at-home and alternate-site medical services. The Bannockburn, Ill.-based company is the nation's largest provider of infusion therapies, administering often complex medications at patients' homes or at one of its more than 170 ambulatory clinics across the U.S.

Revenue has more than doubled since 2019 and is on track to climb above $5.5 billion this year, according to company guidance. Yet despite a surge in profitability and rising margins, shares of Option Care, at a recent $27.56, have been roughly flat since 2022. The stock offers a combination of solid growth tailwinds and compelling value that deserves a closer look.

The U.S. home healthcare market is undergoing powerful growth, fueled by a convergence of factors that accelerated during the Covid-19 pandemic. Central to this trend is patient preference: An aging population with rising incidents of chronic conditions is increasingly seeking the comfort and convenience of care at home. The infusion therapy market is projected to grow at an average annual rate of 8.6% through 2030, according to industry estimates.

Therapeutic innovations are helping to spur growth as new cutting-edge biologics and personalized medications are increasingly designed for infusion delivery. Insurance networks and health systems, for their part, have embraced the home-care model because it frees up hospital beds and ultimately lowers overall costs.

Option Care operates as both a managed care company and a specialty pharmacy. With its team of more than 5,000 clinicians, it is a vital part of the home care market and well-positioned to capture market share.

This past year, however, didn't lack its share of challenges. In late 2024, the company received a notice from the manufacturer of the blockbuster drug Stelara (used to treat inflammatory conditions like Crohn's disease and plaque psoriasis) that it would significantly reduce the price spread that specialty pharmacies like Option Care can earn by billing customers. This adjustment, tied to the Inflation Reduction Act of 2022, was expected to lower Option Care's 2025 gross profit by $60 million to $70 million.

While a setback, the recent selloff may have created an exciting entry point in the stock for investors. The company has played down any long-term consequences, noting that no other therapy represents more than 5% of its total revenue. Furthermore, only 12% of its revenue was reimbursable through direct governmental programs in 2024, providing a cushion against future legislative changes through a diversified private-payer profile.

Option Care's second-quarter operating and financial momentum figures show the company hasn't missed a beat. Revenue climbed by 15% year over year, and adjusted earnings per share of 41 cents were 11% higher than the result last year. A rising proportion of treatments performed at its dedicated clinics has supported profitability margins by allowing nurses to treat more patients.

Management projected confidence in the outlook by raising its full-year guidance. Option Care now expects 2025 revenue growth of around 13%, with a target for adjusted EPS between $1.65 and $1.72, representing an 8% annual increase at the midpoint. Earlier this year, the company approved a $500 million share repurchase program.

Citizens JMP Securities analyst Constantine Davides recently reiterated an Outperform rating on Option Care stock, with a price target of $38, implying a 38% increase. His report highlighted the "de-risked nature of the company's therapeutic portfolio" after the Stelara pricing adjustment, suggesting a layer of uncertainty has been removed. Davides also noted an expectation for the company's market-share gains to accelerate into 2026.

Recent strategic acquisitions of smaller players speak to management's ability to deploy capital. In January, the company bought Intramed Plus, a regional infusion specialist, expanding its footprint in the Southeast with new payer relationships.

The company's long-term growth runway is further bolstered by bipartisan support in Congress to expand access to home care services. The Preserving Patient Access to Home Infusion Act was introduced this year with the intent to modernize how the Centers for Medicare and Medicaid Services recognizes home infusion, acknowledging home infusion as a cost-effective, patient-preferred alternative. While the passage of this and similar bills is uncertain, its clear the home care movement is here to stay.

As an investment, the stock of Option Care looks like a bargain, given that it trades for only 11 times enterprise value to its estimated 2025 earnings before interest, taxes, depreciation, and amortization, or Ebitda. That is a discount to the broader market and below the company's average valuation multiple that has ranged between 10x and 17x Ebitda since 2022. The stock has room to reprice higher as it continues to execute its strategy.

The potential upside doesn't come without risks. The home care industry, which includes names like BrightSpring Health Services, is highly competitive. BrightSpring combines infusion therapy with broader hospice and rehabilitation offerings and has posted strong growth, but carries a high debt load and trades at a forward price/earnings ratio of 25 compared with Option Care's 15. Large insurance providers such as UnitedHealth Group and Cigna Group are also offering their own alternative care site services, although these still make up a small portion of their business and can be subject to network restrictions.

While the market is likely large enough for multiple players, any sign that Option Care is lagging behind its peers would undermine the bullish case. Its key advantage is its pure-play infusion profile and national footprint, which is attractive to drug manufacturers seeking widespread availability.

For now, Option Care Health makes for a high-quality small-cap growth stock well-positioned to reward shareholders over the long run.

Write to Dan Victor at dan.victor@barrons.com

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September 19, 2025 21:31 ET (01:31 GMT)

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