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Healthcare Services (HCSG)
NASDAQ:HCSG
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Healthcare Services (HCSG) AI Stock Analysis

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HCSG

Healthcare Services

(NASDAQ:HCSG)

Rating:69Neutral
Price Target:
$14.50
▲(10.94%Upside)
Healthcare Services Group shows a stable financial performance and positive future growth outlook, supported by strategic initiatives and industry fundamentals. However, the valuation appears stretched, and recent restructuring impacts add uncertainty. Technical analysis indicates a neutral trend, which, combined with the high P/E ratio, suggests caution.
Positive Factors
Revenue Growth
Revenue growth is slightly ahead of the management's prior guidance, driven by supportive trends in skilled nursing facilities and positive Medicare/Medicaid rate updates.
Stock Repurchase
The company has announced a $50 million 12-month repurchase plan, indicating confidence in its financial health and potential future performance.
Valuation
The company's valuation at the $19 price target indicates a discount to the median multiple of similar services companies, suggesting potential for growth as performance improves.
Negative Factors
Bad-Debt Expense
The bankruptcy filing will likely lead to a bad-debt expense increase/accounts receivable write-off at HCSG during the upcoming quarter.
Bankruptcy Impact
The bottom line results were lower than expectations due to a bad-debt expense related to the bankruptcy of its largest customer.
Customer Bankruptcy
Genesis Healthcare Group, one of the largest skilled nursing operators in the United States, announced that it has filed for Chapter 11 bankruptcy.

Healthcare Services (HCSG) vs. SPDR S&P 500 ETF (SPY)

Healthcare Services Business Overview & Revenue Model

Company DescriptionHealthcare Services Group, Inc. provides management, administrative, and operating services to the housekeeping, laundry, linen, facility maintenance, and dietary service departments of nursing homes, retirement complexes, rehabilitation centers, and hospitals in the United States. It operates through two segments, Housekeeping and Dietary. The Housekeeping segment engages in the cleaning, disinfecting, and sanitizing of resident rooms and common areas of the client's facility, as well as laundering and processing of the bed linens, uniforms, resident personal clothing, and other assorted linen items utilized at a client's facility. The Dietary segment provides food purchasing, meal preparation, and professional dietitian services, which include the development of menus that meet the dietary needs of residents. This segment also offers on-site management and clinical consulting services to facilities. As of December 31, 2021, the company provided its services to approximately 3,000 facilities. Healthcare Services Group, Inc. was incorporated in 1976 and is based in Bensalem, Pennsylvania.
How the Company Makes MoneyHealthcare Services Group, Inc. generates revenue through service contracts with healthcare facilities. The company earns money by providing recurring and essential services such as housekeeping, laundry, and dietary management. HCSG typically enters into long-term agreements with its clients, which provide a steady revenue stream. The company may also benefit from economies of scale and operational efficiencies, allowing them to offer competitive pricing while maintaining profitability. Additionally, strategic partnerships and maintaining high service quality can contribute to client retention and expansion opportunities, further enhancing revenue potential.

Healthcare Services Earnings Call Summary

Earnings Call Date:Jul 23, 2025
(Q2-2025)
|
% Change Since: 0.15%|
Next Earnings Date:Oct 22, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong revenue growth and client retention, increased cash flow projections, and a positive industry outlook. However, the Genesis HealthCare restructuring significantly impacted financial results, leading to high costs and negative margins in certain segments. Despite these challenges, the company's strategic initiatives and share repurchase plan demonstrate confidence in future growth.
Q2-2025 Updates
Positive Updates
Revenue Growth and Client Retention
Second quarter growth exceeded expectations, marking the fifth consecutive sequential revenue increase and the highest rate of growth since Q1 2018. Revenue was $458.5 million, a 7.6% increase over the prior year, driven by new client wins and high retention. The company carried this positive momentum into the back half of the year.
Increased Cash Flow Projections
The company is raising its 2025 cash flow from operations forecast, excluding the change in payroll accrual, from $60 million to $75 million to $70 million to $85 million.
Share Repurchase Plan
Healthcare Services Group announced plans to repurchase $50 million of common stock over the next 12 months, indicating confidence in the company's long-term growth potential.
Improved Industry Fundamentals
The industry is benefiting from a demographic tailwind, with steady occupancy, increasing workforce availability, and a stable reimbursement environment. The One Big Beautiful Bill Act is expected to promote further strength and stability in the industry.
Negative Updates
Genesis HealthCare Restructuring Impact
Genesis HealthCare filed for Chapter 11 bankruptcy, resulting in a $61.2 million noncash charge. This significantly impacted the reported results for the second quarter, with an additional estimated $0.04 per share noncash charge related to Genesis restructuring expected in the third quarter.
High Cost of Services
Cost of services was reported at $455.5 million or 99.4%, including a significant noncash charge related to Genesis restructuring. The company aims to manage the second half of 2025 cost of services in the 86% range.
Negative Segment Margins for Dietary Services
Segment margins for Dietary Services were reported at negative 10.1%, heavily impacted by a $40.9 million or 16.2% noncash charge related to Genesis restructuring.
Net Loss and Diluted Loss Per Share
Net loss and diluted loss per share were reported at $32.4 million and $0.44 per share, including the impact of a $0.65 noncash charge related to the Genesis restructuring.
Company Guidance
During the second quarter of 2025, Healthcare Services Group, Inc. reported strong performance despite challenges, particularly the Genesis HealthCare restructuring. The company achieved a 7.6% year-over-year increase in revenue, reaching $458.5 million, with Environmental and Dietary Services contributing $205.8 million and $252.7 million, respectively. Despite a $61.2 million non-cash charge related to Genesis, the company raised its 2025 cash flow from operations forecast from $60 million-$75 million to $70 million-$85 million. The strategic priorities include driving growth, managing costs, and optimizing cash flow, with plans to repurchase $50 million of common stock, highlighting confidence in future growth potential. Occupancy rates remain steady, and industry fundamentals are strong, supported by legislative measures like the One Big Beautiful Bill Act. The company aims to maintain a 90%+ client retention rate, continue cross-selling opportunities, and leverage its strong balance sheet to support growth through organic and inorganic initiatives.

Healthcare Services Financial Statement Overview

Summary
Healthcare Services demonstrates a healthy financial position with stable revenue growth, strong operational efficiency, and excellent cash flow management, accompanied by a low leverage balance sheet. The company is well-positioned within the Medical - Care Facilities industry for continued growth, though enhancing net profitability remains a strategic focus.
Income Statement
78
Positive
Healthcare Services shows solid profitability with a Gross Profit Margin of 37.0% for TTM, indicating efficient cost management. The Net Profit Margin is modest at 2.38%, suggesting room for improved efficiency. Revenue Growth Rate is positive, showing a 1.41% increase from the previous year, indicating stable growth despite industry challenges. However, the EBIT Margin is strong at 24.9%, reflecting good operational control. Overall, the income statement reflects a stable financial performance with potential for growth in profitability.
Balance Sheet
82
Very Positive
The company maintains a strong balance sheet with a low Debt-to-Equity Ratio of 0.015, indicating minimal leverage and financial stability. The Return on Equity (ROE) is 8.05%, showcasing effective utilization of equity to generate profits. The Equity Ratio of 62.5% suggests a robust capital structure with significant equity financing. Overall, the balance sheet demonstrates financial health and low risk exposure.
Cash Flow
74
Positive
Healthcare Services exhibits a strong Free Cash Flow Growth Rate of 220.65%, indicating improved cash generation capabilities. The Operating Cash Flow to Net Income Ratio is 2.04, highlighting efficient cash conversion from operations. However, the Free Cash Flow to Net Income Ratio is 1.90, suggesting strong cash retention for investments. While cash flows are robust, maintaining this growth trajectory is crucial for future stability.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.72B1.67B1.69B1.64B1.76B
Gross Profit228.09M214.75M193.84M226.88M267.99M
EBITDA73.96M75.21M62.94M77.88M144.83M
Net Income39.47M38.39M34.24M48.54M98.68M
Balance Sheet
Total Assets802.77M790.65M718.33M777.53M785.03M
Cash, Cash Equivalents and Short-Term Investments107.31M147.46M121.48M185.19M264.34M
Total Debt8.03M36.23M33.10M11.30M11.36M
Total Liabilities302.85M334.04M292.16M324.85M304.57M
Stockholders Equity499.93M456.62M426.17M452.68M480.46M
Cash Flow
Free Cash Flow24.47M38.09M-13.38M31.42M212.87M
Operating Cash Flow30.80M43.50M-8.17M37.11M217.21M
Investing Cash Flow6.05M-3.29M2.58M-22.99M-36.84M
Financing Cash Flow-31.05M-12.15M-38.93M-82.65M-68.37M

Healthcare Services Technical Analysis

Technical Analysis Sentiment
Negative
Last Price13.07
Price Trends
50DMA
14.12
Negative
100DMA
12.97
Positive
200DMA
12.17
Positive
Market Momentum
MACD
-0.29
Positive
RSI
42.38
Neutral
STOCH
17.98
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HCSG, the sentiment is Negative. The current price of 13.07 is below the 20-day moving average (MA) of 13.51, below the 50-day MA of 14.12, and above the 200-day MA of 12.17, indicating a neutral trend. The MACD of -0.29 indicates Positive momentum. The RSI at 42.38 is Neutral, neither overbought nor oversold. The STOCH value of 17.98 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HCSG.

Healthcare Services Risk Analysis

Healthcare Services disclosed 23 risk factors in its most recent earnings report. Healthcare Services reported the most risks in the "Legal & Regulatory" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Healthcare Services Peers Comparison

Overall Rating
UnderperformOutperform
Sector (51)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
75
Outperform
$1.49B13.8911.19%2.61%19.16%31.92%
69
Neutral
$946.43M92.372.28%5.17%-65.33%
64
Neutral
$764.18M28.9211.28%30.04%43.47%
56
Neutral
$1.05B-10.01%-1.13%-17.77%
51
Neutral
$7.35B0.50-65.61%2.47%15.28%1.44%
45
Neutral
$683.38M18.62-21.08%-18.13%-215.78%
45
Neutral
$774.52M228.1642.49%9.05%
* Healthcare Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
HCSG
Healthcare Services
13.07
2.65
25.43%
AMN
AMN Healthcare Services
17.85
-43.38
-70.85%
MD
Pediatrix Medical Group
11.98
4.36
57.22%
NHC
National Healthcare
94.57
-21.89
-18.80%
PNTG
Pennant Group
22.07
-5.93
-21.18%
AVAH
Aveanna Healthcare Holdings
3.74
0.47
14.37%

Healthcare Services Corporate Events

Legal ProceedingsBusiness Operations and StrategyFinancial Disclosures
Healthcare Services Responds to Genesis HealthCare Bankruptcy
Neutral
Jul 10, 2025

Healthcare Services Group, Inc. announced that Genesis HealthCare, Inc. filed for Chapter 11 bankruptcy on July 9, 2025. Despite this, HCSG expects to maintain its services to Genesis facilities without disruption. The bankruptcy will result in non-cash charges for HCSG in the second and third quarters of 2025. CEO Ted Wahl stated that while the Genesis situation is disappointing, the overall industry fundamentals remain strong, and HCSG’s growth and cash flow expectations for 2025 remain unchanged, with anticipated mid-single digit revenue growth and $60 to $75 million in cash flow from operations.

The most recent analyst rating on (HCSG) stock is a Buy with a $14.00 price target. To see the full list of analyst forecasts on Healthcare Services stock, see the HCSG Stock Forecast page.

Executive/Board ChangesShareholder Meetings
Healthcare Services Holds Annual Shareholder Meeting
Neutral
May 28, 2025

On May 27, 2025, Healthcare Services held its annual shareholder meeting to vote on various management proposals. The shareholders elected nine directors for one-year terms, approved the executive compensation in a non-binding advisory vote, and ratified Grant Thornton LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2025.

The most recent analyst rating on (HCSG) stock is a Buy with a $14.00 price target. To see the full list of analyst forecasts on Healthcare Services stock, see the HCSG Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 26, 2025