Here's Why Investors Should Bet on Select Medical Stock Now
Select Medical Holdings Corporation SEM has emerged a lucrative investment option, courtesy of its consistent top-line growth over the past several years, strong performance at its Concentra segment and robust cash generating abilities. In fact, these factors instill further optimism in the stock’s long-term prospects.
The stock currently has a Zacks Rank #1 (Strong Buy) and an impressive Value Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank of 1 or 2 (Buy), offer the best opportunities in the value investing space.
Let’s analyze the factors that make this stock a compelling choice for investors right now.
Solid Prospects: The Zacks Consensus Estimate for Select Medical’s current-year and next-year earnings indicate an improvement of 8.9% and 24.8%, respectively, from the year-ago reported figure.
Positive Estimate Revision: The Zacks Consensus Estimate for current-quarter and current-year earnings have been revised upward by 61.1% and 53.4%, respectively, over the past 30 days.
Impressive Earnings Surprise History: Select Medical boasts an impressive earnings surprise record. The company’s bottom line outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 212.61%.
Strong Operating Profit: Select Medical’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 18.6% has improved in the past three years, comparing favorably with the prior-year quarter’s ROE of 14.8%. This, in turn, reflects its tactical efficiency in utilizing its shareholders’ funds.
Business Tailwinds: Revenues at Select Medical have grown consistently since 2010 at a 10-year CAGR of 8.6%. The rise can be primarily attributed to revenues generated from improved services rendered to its patients, which has helped it to emerge as a high-quality and cost-effective healthcare provider.
Moreover, the healthcare provider has been undertaking strategic buyouts for enhancing its diversified portfolio of facilities in the United States. These acquisitions, which have led to the company’s inorganic growth, have also enabled it to expand to various regions across the United States.
One of the most notable deals being the buyout of U.S. Health Works in 2018, which greatly benefited the company’s Concentra segment. The segment has been witnessing increased visits, decreased patient turnaround times and enhanced staffing efficiencies, which position Select Medical well for growth.
Furthermore, strong cash flows bode well for Select Medical, which enables it to not only engage in prudent shareholder-friendly moves via share buybacks but also focus on multiple potential acquisition opportunities.
Price Performance
Shares of Select Medical have gained 19.8% in a year compared with the industry’s growth of 23.9%.
The price performance looks decent in comparison to its industry peers, namely, Humana Inc. HUM, Magellan Health, Inc. MGLN and Anthem, Inc. ANTM, which rallied 45%, 14.9% and 9.3%, respectively, in a year.
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Humana Inc. (HUM) : Free Stock Analysis Report
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