Unveiling Surgery Partners (SGRY)'s Value: Is It Really Priced Right? A Comprehensive Guide
As of October 11, 2023, Surgery Partners Inc (NASDAQ:SGRY) experienced a daily loss of 5.82%, with a 3-month loss of 37.9%, and a Loss Per Share of 0.56. But does this mean the stock is fairly valued? This article delves into the financials of Surgery Partners to answer this question. Read on for an in-depth valuation analysis.
Company Overview
Surgery Partners Inc is a significant player in the U.S. ambulatory surgery center sector, operating surgical facilities in approximately 30 states. The company partners with physician groups and larger local healthcare systems to provide surgical procedures, which form the bulk of its revenue. Additionally, Surgery Partners operates a clinical lab, urgent care facilities, and a handful of physician practices. Currently, the stock price stands at $26.52, with a market cap of $3.40 billion. The GF Value, an estimation of the fair value, is $27.99, indicating that the stock might be fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is computed based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Surgery Partners (NASDAQ:SGRY) appears to be fairly valued based on the GF Value calculation. Given the current price of $26.52 per share and a market cap of $3.40 billion, the stock seems to align with the GF Value. Therefore, the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Therefore, understanding the financial strength of a company is crucial before deciding to buy its stock. Surgery Partners has a cash-to-debt ratio of 0.06, which is worse than 87.27% of 652 companies in the Healthcare Providers & Services industry. The overall financial strength of Surgery Partners is ranked 4 out of 10, indicating that its financial strength is poor.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Surgery Partners has been profitable 2 over the past 10 years. Over the past twelve months, the company had a revenue of $2.70 billion and a Loss Per Share of $0.56. Its operating margin is 14.26%, which ranks better than 81.1% of 656 companies in the Healthcare Providers & Services industry. Overall, the profitability of Surgery Partners is ranked 5 out of 10, indicating fair profitability.
Growth is one of the most important factors in the valuation of a company. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Surgery Partners is -10%, which ranks worse than 88.52% of 566 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth is -8%, which ranks worse than 76.79% of 517 companies in the Healthcare Providers & Services industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate a company's profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. Over the past 12 months, Surgery Partners's ROIC is 5.77 while its WACC came in at 10.83.
Conclusion
Overall, Surgery Partners (NASDAQ:SGRY) stock appears to be fairly valued. The company's financial condition is poor, its profitability is fair, and its growth ranks worse than 76.79% of 517 companies in the Healthcare Providers & Services industry. To learn more about Surgery Partners stock, you can check out its 30-Year Financials here.
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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.
