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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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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Select Medical (SEM) is a stock many investors are watching right now. SEM is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock is trading with P/E ratio of 14.70 right now. For comparison, its industry sports an average P/E of 15.88. SEM's Forward P/E has been as high as 20.21 and as low as 10.09, with a median of 13.98, all within the past year.

Investors will also notice that SEM has a PEG ratio of 0.98. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SEM's PEG compares to its industry's average PEG of 1.18. Over the last 12 months, SEM's PEG has been as high as 1.35 and as low as 0.67, with a median of 0.93.

Finally, our model also underscores that SEM has a P/CF ratio of 9.83. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. SEM's P/CF compares to its industry's average P/CF of 14.45. Within the past 12 months, SEM's P/CF has been as high as 10.23 and as low as 4.61, with a median of 6.87.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Select Medical is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, SEM feels like a great value stock at the moment.


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