What Makes Healthcare Services Group (HCSG) a Good Investment Opportunity?
Heartland Advisors, an investment management company, released its “Heartland Value Fund” second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the Value Investor Class of the fund returned 3.14% and the Value Institutional Class returned 3.18% compared to 3.18% for the Russell 2000 Value Index. Although the fund performed in line with the benchmark, it lagged in the tech-heavy broader markets. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Heartland Value Fund highlighted stocks like Healthcare Services Group, Inc. (NASDAQ:HCSG) in the Q2 2023 investor letter. Headquartered in Bensalem, Pennsylvania, Healthcare Services Group, Inc. (NASDAQ:HCSG) engages in managing housekeeping, laundry, linen, facility maintenance, and dietary services within the healthcare sector. On July 13, 2023, Healthcare Services Group, Inc. (NASDAQ:HCSG) stock closed at $14.75 per share. One-month return of Healthcare Services Group, Inc. (NASDAQ:HCSG) was 2.22%, and its shares lost 16.76% of their value over the last 52 weeks. Healthcare Services Group, Inc. (NASDAQ:HCSG) has a market capitalization of $1.094 billion.
Heartland Value Fund made the following comment about Healthcare Services Group, Inc. (NASDAQ:HCSG) in its second quarter 2023 investor letter:
"Industrials. Healthcare Services Group, Inc. (NASDAQ:HCSG) manages housekeeping, laundry, dining, and nutritional services within the healthcare market. The stock has come under pressure in recent years, as occupancy levels at their clients’ facilities plummeted during the global pandemic. Meanwhile, inflation in the aftermath of the pandemic disadvantaged HCSG’s contract pricing. We believe those headwinds have abated, as occupancy is improving, and the company is restructuring its contracts to include more dynamic pricing. There is also a significant opportunity to gain market share, as only 30% of skilled nursing facilities currently outsource their housekeeping.
Management’s efforts have guided EBITDA margins back to 6%. Today, HCSG sports a balance sheet that exceeds our expectations with net cash and strong free cash flow and trades at 0.6X enterprise value to sales. Yet when it was at this level of profitability in the past, the business was priced at 1.5X EV/Sales."
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Healthcare Services Group, Inc. (NASDAQ:HCSG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Healthcare Services Group, Inc. (NASDAQ:HCSG) at the end of first quarter which was 12 in the previous quarter.
We discussed Healthcare Services Group, Inc. (NASDAQ:HCSG) in another article and shared the list of little-known stocks billionaires are loading up on. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
