Select Medical Holdings Corporation (NYSE:SEM), which is in the healthcare business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Select Medical Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in Select Medical Holdings?
According to my valuation model, Select Medical Holdings seems to be fairly priced at around 17% below my intrinsic value, which means if you buy Select Medical Holdings today, you’d be paying a fair price for it. And if you believe the company’s true value is $27.41, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Select Medical Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Select Medical Holdings generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 50% over the next couple of years, the future seems bright for Select Medical Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? SEM’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on SEM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Select Medical Holdings. You can find everything you need to know about Select Medical Holdings in the latest infographic research report. If you are no longer interested in Select Medical Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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