Shareholders of Select Medical Holdings Corporation (NYSE:SEM) will be pleased this week, given that the stock price is up 11% to US$28.21 following its latest annual results. Results were roughly in line with estimates, with revenues of US$5.5b and statutory earnings per share of US$1.10. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether analysts have changed their mind on Select Medical Holdings after the latest results.
Taking into account the latest results, the latest consensus from Select Medical Holdings's seven analysts is for revenues of US$5.65b in 2020, which would reflect a modest 3.5% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to jump 25% to US$1.38. Before this earnings report, analysts had been forecasting revenues of US$5.64b and earnings per share (EPS) of US$1.38 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target rose 9.6% to US$28.63 despite there being no meaningful change to earnings estimates. It could be that analysts are reflecting the predictability of Select Medical Holdings's earnings by assigning a price premium. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Select Medical Holdings, with the most bullish analyst valuing it at US$33.00 and the most bearish at US$22.00 per share. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the Select Medical Holdings's past performance and to peers in the same market. We would highlight that Select Medical Holdings's revenue growth is expected to slow, with forecast 3.5% increase next year well below the historical 11%p.a. growth over the last five years. By way of comparison, other companies in this market with analyst coverage, are forecast to grow their revenue at 6.7% per year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Select Medical Holdings.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Select Medical Holdings going out to 2021, and you can see them free on our platform here.
It might also be worth considering whether Select Medical Holdings's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.
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