This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

December 24, 2009 - Odyssey Healthcare, Inc. (ODSY-NASDAQ) and its subsidiaries provide hospice care in the United States. Its hospice services focus on palliative care for patients with life-limiting illnesses, which is care directed at managing pain and other discomforting symptoms, and addressing the psychosocial and spiritual needs of patients and their families.

As of December 31, 2008, Odyssey HealthCare operated 94 Medicare-certified hospice programs, serving patients and their families in 29 states. The company was founded in 1995 and is based in Dallas, Texas.

When a company takes earnings from 62 cents in one year to $1.18 the next, investors need to take notice. That's what Odyssey will most likely do this year. Seven analysts have a consensus estimate of $1.18 for ODSY for 2009, up from 62 cents last year. Next year, the estimate is for $1.26. Earnings for the December quarter, out in January, are projected to be 29 cents a share, up from 17 cents in the same period last year. Clearly, ODSY is improving its business model.

With that good news, it's only fair to point out that in 2006, the company made 60 cents a share only to report 41 cents in 2007, followed by 62 cents. History suggests there may not be a straight line up for earnings. Still, when a company doubles the bottom line, it's worth looking at.

Positive improvement in the third quarter, when earnings beat estimates by 40% (35 cents vs 25 cents), came from higher daily average patient count and better leverage of fixed expenses. Analysts see the fourth quarter showing moderating volume and a possible uptick in the Medicare cap contractuals. Recently changes in the Medicare reimbursement levels, a key factor of ODSY's revenues, increased by 1.4% to participating hospices. There is a seven year phaseout of a certain Medicare adjustment factor which will be partially offset by this new reimbursement level. Management is also looking to raise admissions and have a more balanced patient mix along with better cost containment to compensate for the phase out.

For a small company, there's a fair amount of cash, about $100 million. Management is using it to pay down debt which is now at $18.4 million or 28% of capital. With that much cash, the company could go shopping for others, expand on its own, buy back shares or even start a dividend. The last isn't too likely since growing companies like to keep cash for business purposes as long as opportunities are there to give a better return to shareholders than a dividend would.

More numbers: Price to sales is .78. Price to book is 2.26. Book value is $7.05. Operating margin for the last 12 months was 10% while Profit margin was 5%. Return on equity was 16.43%. Cash per share is $2.98. Current ratio is 1.71. Beta for the last 12 months was .39. The 52-week low was on December 30, 2008 at $7.85. The 52-week high was on December 23, 2009, at $15.98. There are 33.13 million shares outstanding. Insiders own 2.06% of them. Institutions have 94.40%. There is no dividend.

Aggressive investors should find this stock interesting. It's rare these days, in this difficult economy, to discover a stock that can double earnings in a year with good prospects for further gains for quite some time. Check it out with the caveat that those earnings have been volatile in the past.

- Company Web site: www.odyssey-healthcare.com

- Ted Allrich