Is Surgery Partners Inc (SGRY) Set to Underperform? Analyzing the Factors Limiting Growth
Long-established in the Healthcare Providers & Services industry, Surgery Partners Inc (NASDAQ:SGRY) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 7.42%, juxtaposed with a three-month change of -39.02%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Surgery Partners Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Financial strength rank: 4/10
Profitability rank: 5/10
Growth rank: 0/10
GF Value rank: 3/10
Momentum rank: 10/10
Based on the above method, GuruFocus assigned Surgery Partners Inc the GF Score of 60 out of 100, which signals poor future outperformance potential.
Company Snapshot: Surgery Partners Inc
Surgery Partners Inc is one of the few remaining independent ambulatory surgery center operators in the U.S. with national scale. The firm operates surgical facilities in approximately 30 states in partnership with physician groups and larger local healthcare systems. While surgical procedures drive a majority of the firm's revenue, the company also operates a clinical lab, urgent care facilities, and a handful of physician practices to provide additional healthcare services within the communities it serves. It operates in two segments: Surgical Facility Services and Ancillary Services out of which the Surgical Facility Services segment accounts for the majority of revenue.
Financial Strength Analysis
Surgery Partners Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 1.75, which positions it worse than 83.54% of 401 companies in the Healthcare Providers & Services industry, highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just 1.13, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.06 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 6.68, which is above Joel Tillinghast's warning level of 4 and is worse than 80.54% of 406 companies in the Healthcare Providers & Services industry.
Profitability Analysis
Surgery Partners Inc's low Profitability rank can also raise warning signals. Additionally, Surgery Partners Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 23.15; 2019: 23.14; 2020: 20.42; 2021: 22.08; 2022: 22.64; . This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where Surgery Partners Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -10 per year over the past three years, which underperforms worse than 88.52% of 566 companies in the Healthcare Providers & Services industry. Stagnating revenues may pose concerns in a fast-evolving market.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. It is crucial for investors to consider these factors before making investment decisions. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
