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Are Investors Undervaluing Select Medical (SEM) Right Now?

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Zacks Equity Research
·2 min read
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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now is Select Medical (SEM). SEM is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock is trading with P/E ratio of 14.77 right now. For comparison, its industry sports an average P/E of 16.09. Over the past year, SEM's Forward P/E has been as high as 20.21 and as low as 7.91, with a median of 13.59.

Investors will also notice that SEM has a PEG ratio of 0.98. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SEM's industry has an average PEG of 1.20 right now. Within the past year, SEM's PEG has been as high as 1.35 and as low as 0.53, with a median of 0.91.

Finally, investors will want to recognize that SEM has a P/CF ratio of 9.64. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 14.45. Over the past year, SEM's P/CF has been as high as 9.80 and as low as 4.02, with a median of 6.72.

Value investors will likely look at more than just these metrics, but the above data helps show that Select Medical is likely undervalued currently. And when considering the strength of its earnings outlook, SEM sticks out at as one of the market's strongest value stocks.


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