August 30, 2010 - Hill-Rom Holdings, Inc. (HRC-NYSE) provides medical technologies and related services for the health care industry in the United States and internationally. It provides patient support systems, non-invasive therapeutic products for acute and chronic medical conditions, medical equipment rentals, safe mobility and handling solutions, and information technology solutions.

In addition, the company provides peak-need rentals and asset management for moveable medical equipment, such as ventilators defibrillators, intravenous pumps, and patient monitoring equipment. Additionally, it offers patient mobilization solutions, such as patient lifts, slings, and other patient transfer technology; health care furniture solutions comprising bedside cabinets, adjustable-height over bed tables, and patient room furniture; and architectural products, such as headwalls and power columns that enable medical gases, communication accessories, and electrical services to be distributed in patient rooms.

The company develops and markets various communications technologies and software solutions, such as a suite of clinical communication and productivity solutions, NaviCare platform, and NaviCare nurse call, as well as WatchChild obstetric data management system primarily to improve patient safety. It sells through a direct sales force and distributors. The company was formerly known as Hillenbrand Industries, Inc. and changed its name to Hill-Rom Holdings, Inc. in March 2008. Hill-Rom Holdings was founded in 1969 and is headquartered in Batesville, Indiana.

Hill-Rom was a great buy in March of 2009. It traded at $8.60 a share. If you didn't catch it then, you paid more almost every day. Now it's near its all-time high of $35.89, reached on August 9, 2010. In the last 52-weeks, the stock is up 54%. So is it too late to buy? Here's what we know.

While revenues are growing, they're not quite as robust as earnings. In the third quarter, they were up 7% to $366 million. When the bottom line outpaces the top line, that means costs are coming down. That's certainly the case here. Management enacted a restructuring recently and that's keeping operating costs in check. For the final quarter, expenses will continue to go lower and profits should grow by 30% while revenues only pick up by 10%.

More benefits from restructuring will continue through next year. When completed, it should save about $16 million of annual operating costs. That money can be allocated to other areas of the business: Research & Development most likely, but it could be used for hiking the dividend, buying back stock or acquiring other companies (its last purchase was Liko in October of 2008).

Health care is a priority in all countries, not just the U.S. Hill-Rom is seeing increased demand from overseas, and as standards of living improve globally, expect more sales coming from outside the U.S.

There are a few flags waving here, and they're red. One of them is the stock's relative youth. It's only been trading since early 2008 as the new entity. It used to be known as Hillenbrand Industries. It spun off Hillenbrand, Inc. in March, 2008. Another concern: the quick run up in price. While the rest of the market has been foundering for the last several months, this stock has only gone higher. Valuations are pushing comfort zones, ones like Price to Book of 3, a P/E of 20.

More numbers: Market Cap is $2.03 billion. Forward P/E is 17. Operating margin for the last 12 months was 10.18% while Profit margin was 7.03%. Return on assets was 7.61%. There's $208 million in cash for $3.28 a share. Total debt is $154.5 million or about 13% of capital. Current ratio is 2.47. Book value is 10.66. Beta is 1.5. There are 63.49 million shares outstanding with a Float of 62.04 million. Insiders own 2.22% while Institutions have 76%. There's an annual dividend of 41 cents. It takes 26% of earnings to pay it. Last dividend date was June 29. The ex-dividend date was June 14.

Hill-Rom has a lot of good going. Its restructuring efforts are paying solid dividends. Look for operating and profit margins to widen as more of the program takes effect. But be aware of how far and fast this stock has come in a relatively short time. If earnings miss estimates or even only meet estimates after several quarters of beating them, this stock may pause and take a dip. Then might be a better time to consider adding this one if it fits your risk profile.

- Company Web site: www.hill-rom.com

Ted Allrich