Select Medical Holdings Corporation (NYSE:SEM), which is in the healthcare business, and is based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $21.6 and falling to the lows of $16.97. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Select Medical Holdings’s current trading price of $17.35 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Select Medical Holdings’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Select Medical Holdings still cheap?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 9.82% above my intrinsic value, which means if you buy Select Medical Holdings today, you’d be paying a relatively reasonable price for it. And if you believe that the stock is really worth $15.8, then there isn’t really any room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that Select Medical Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Select Medical Holdings look like?
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. However, with a relatively muted profit growth of 5.8% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Select Medical Holdings, at least in the short term.
What this means for you:
Are you a shareholder? SEM’s 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 track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on SEM, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.