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What Makes Select Medical (SEM) an Attractive Investment Pick

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Zacks Equity Research
·4 min read
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Select Medical Holdings Corporation SEM looks well-poised for long-term growth on the back of its leadership position and cost-effective healthcare services in each of its business segments. A geographically diversified portfolio of facilities in the United States enables Select Medical to bank on multiple buyout opportunities.

The stock currently sports a Zacks Rank #1 (Strong Buy). Back-tested results showed that stocks with a Value Score of A or B combined with a Zacks Rank of 1 or 2 (Buy) are the best investment bets.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s check out the factors that make the stock an attractive bet.

Solid Prospects and Northbound Earnings Estimate: The Zacks Consensus Estimate for Select Medical’s long-term earnings growth (5 years) is pegged at 15%, comparing favorably with the industry’s average of 13.8%.

The stock has witnessed a 53.4% upward earnings estimate revision for the current year to $1.35 per share over the past 60 days. The same for 2021 has moved 15.8% north.

Impressive Earnings Surprise History: Select Medical has a pleasant earnings surprise record. The company’s bottom line outpaced the Zacks Consensus Estimate in each of the trailing four quarters. The average earnings beat is 212.61%.

Increasing Top Line: The company’s revenues have been improving over the years. The metric was up 1.5% in the first six months of 2020. This growth has been achieved on the back of its supreme market position and reputation as a high-quality, cost-effective healthcare provider in all its business segments, which in turn, allow it to attract patients and employees, aid marketing efforts to referral sources and help negotiate payer contracts.

Accretive Acquisitions: Since the company’s inception in 1997 through 2018, it has completed 10 significant acquisitions for approximately $3.32 billion, the most notable deals being the buyouts of Physiotherapy, Concentra and U.S. Health Works. The company is well positioned to capitalize on the consolidation opportunities within each of its business segments, which operate in a highly fragmented market and selectively augment its internal growth. With its geographically diversified portfolio of facilities in the United States, the commpany’s footprint provides a wide-ranging perspective on multiple acquisition prospects.

Concentra Segment Poised to Grow: In 2018, the company’s Concentra segment made a significant progress on the addition of U.S. HealthWorks. This strategic integration resulted in increased visits, decreased patient turnaround times and enhanced staffing efficiencies. Concentra is the nation’s largest provider of occupational health services. This segment’s expanded national presence and its firm focus on quality care and patient/client satisfaction give the company a distinct competitive edge and are also expected to drive its growth potential. The segmental revenues rose 14% year over year in the first six months of 2020.

In six months’ time, the stock has surged 30.6% compared with the industry’s growth of 25.9%.

Other stocks in the same space, such as Tenet Healthcare Corporation THC, Community Health Systems, Inc. CYH and HCA Healthcare, Inc. HCA have also gained  97.5%, 84.3% and 60.6%, respectively, over the same time frame.

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Community Health Systems, Inc. (CYH) : Free Stock Analysis Report
 
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