Healthcare Services (HCSG) AI Stock Analysis

• Market Cap: $1.35B
• Dividend Yield: N/A
• Average Volume (3M): 781.88K
• Price to Earnings (P/E): 35.4
• Beta (1Y): 1.08
• Revenue Growth: 6.26%
• EPS Growth: -19.33%
• Country: US
• Employees: 35,300
• Sector: Healthcare
• Sector Strength: 45
• Industry: Medical - Care Facilities
• EPS (TTM): 0.23
• Shares Outstanding: 70,455,505
• 10 Day Avg. Volume: 738,293
• 30 Day Avg. Volume: 781,878
• PEG Ratio: 5.65
• Price to Book (P/B): 1.71
• Price to Sales (P/S): 0.50
• P/FCF Ratio: 35.03
• Enterprise Value/Market Cap: 0.82
• Enterprise Value/Revenue: 0.61
• Enterprise Value/Gross Profit: 4.92
• Enterprise Value/Ebitda: 15.21
• 1Y Price Target: $22.00
• Price Target Upside: 15.06% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 4
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 72 Outperform
• Price Target: $20.50 ▲(7.22% Upside)

The overall stock score for HCSG is driven by strong financial performance and positive technical indicators. The earnings call provided a positive outlook, although valuation concerns due to a high P/E ratio and lack of dividend yield slightly dampen the score. The company's robust cash flow and low debt levels are significant strengths, positioning it well for future growth.

Positive Factors

Revenue Growth

The consistent revenue growth of 8.5% YoY indicates strong market demand and effective client retention strategies, supporting long-term business expansion.

Cash Flow and Balance Sheet

Robust cash flow and a strong balance sheet provide financial stability and flexibility, enabling strategic investments and resilience against economic fluctuations.

Client Retention

High client retention and new client acquisitions enhance revenue stability and growth potential, reinforcing the company's competitive position in the healthcare services market.

Negative Factors

Profitability Margins

Declining gross profit margins suggest challenges in cost management, potentially impacting long-term profitability if not addressed effectively.

SG&A Expenses

Rising SG&A expenses could pressure operating margins, necessitating improved cost control measures to maintain financial health and competitiveness.

Genesis Healthcare Bankruptcy

The bankruptcy of a major client like Genesis Healthcare poses a risk to revenue stability, requiring strategic adjustments to mitigate potential financial impacts.

Healthcare Services Business Overview & Revenue Model

Company Description

Healthcare 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 Money

HCSG generates revenue primarily through service contracts with healthcare facilities, which pay for the comprehensive management of food service operations, housekeeping, and laundry services. These contracts are typically established on a long-term basis, providing a steady stream of income. The company also benefits from economies of scale, as it serves a large number of clients across various states, allowing it to negotiate better terms with suppliers and optimize operational costs. Additionally, HCSG may engage in partnerships with healthcare providers to enhance service delivery and expand its market presence, further contributing to its revenue growth.

Healthcare Services Financial Statement Overview

Summary

Healthcare Services demonstrates solid financial health with strong cash flow and a robust balance sheet. Revenue growth is moderate, and profitability margins are under pressure, suggesting a need for improved cost management. The low debt levels provide financial flexibility, positioning the company well for future growth opportunities.

Income Statement

The company shows moderate revenue growth with a TTM growth rate of 2.04%. Gross profit margin has slightly decreased from 13.29% in 2024 to 12.49% in TTM, indicating some pressure on cost management. Net profit margin remains stable around 2.2%, but is relatively low for the industry. EBIT and EBITDA margins have slightly declined, suggesting potential challenges in operational efficiency.

Balance Sheet

The balance sheet is strong with a low debt-to-equity ratio of 0.01 in TTM, indicating low leverage and financial stability. Return on equity is reasonable at 7.59%, though it has slightly decreased from previous years. The equity ratio remains healthy, reflecting a solid capital structure.

Cash Flow

Cash flow performance has improved significantly with a TTM free cash flow growth rate of 73.78%. The operating cash flow to net income ratio is 0.49, indicating decent cash generation relative to net income. Free cash flow to net income ratio is high at 0.94, reflecting strong cash conversion.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.81B	1.72B	1.67B	1.69B	1.64B	1.76B
Gross Profit	225.94M	228.09M	214.75M	193.31M	230.57M	267.99M
EBITDA	73.01M	73.96M	75.26M	62.86M	81.56M	144.83M
Net Income	39.73M	39.47M	38.39M	34.24M	48.54M	98.68M
Balance Sheet
Total Assets	804.30M	815.47M	803.18M	718.33M	786.80M	793.45M
Cash, Cash Equivalents and Short-Term Investments	177.46M	135.77M	147.46M	121.48M	185.19M	264.34M
Total Debt	13.86M	16.43M	43.63M	33.10M	17.80M	16.66M
Total Liabilities	308.30M	315.55M	346.57M	292.16M	334.12M	312.99M
Stockholders Equity	496.00M	499.93M	456.62M	426.17M	452.68M	480.46M
Cash Flow
Free Cash Flow	157.92M	24.47M	38.09M	-13.38M	31.42M	212.87M
Operating Cash Flow	163.78M	30.80M	43.50M	-8.17M	37.11M	217.21M
Investing Cash Flow	2.23M	6.05M	-3.29M	2.58M	-22.99M	-36.84M
Financing Cash Flow	-69.74M	-31.05M	-12.15M	-38.93M	-82.65M	-68.37M

Healthcare Services Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 19.12
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HCSG, the sentiment is Positive. The current price of 19.12 is below the 20-day moving average (MA) of 19.19, above the 50-day MA of 18.54, and above the 200-day MA of 15.35, indicating a neutral trend. The MACD of 0.09 indicates Positive momentum. The RSI at 52.48 is Neutral, neither overbought nor oversold. The STOCH value of 72.14 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HCSG.

Healthcare Services Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PNTG	73 Outperform	$1.01B	38.47	10.87%	―	29.89%	10.33%
HCSG	72 Outperform	$1.35B	35.38	8.07%	―	6.26%	-19.33%
ARDT	68 Neutral	$1.32B	6.38	18.28%	―	10.86%	125.05%
USPH	63 Neutral	$1.24B	35.32	7.30%	2.25%	17.50%	154.28%
ACHC	61 Neutral	$1.24B	11.41	3.49%	―	4.58%	-61.50%
ASTH	61 Neutral	$1.42B	148.53	1.29%	―	68.17%	-85.42%
Sector *	51 Neutral	$7.86B	-0.30	-43.30%	2.27%	22.53%	-2.21%