Healthcare Services (HCSG) AI Stock Analysis

• Market Cap: $1.33B
• Dividend Yield: N/A
• Average Volume (3M): 762.60K
• Price to Earnings (P/E): 34.8
• Beta (1Y): 1.04
• 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: 890,461
• 30 Day Avg. Volume: 762,599
• 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: 0.78
• Enterprise Value/Revenue: 0.57
• Enterprise Value/Gross Profit: 4.58
• Enterprise Value/Ebitda: 14.33
• 1Y Price Target: $23.00
• Price Target Upside: 22.28% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3

• Rating: 72 Outperform
• Price Target: $20.50 ▲(8.98% 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 include long-term care facilities, hospitals, and rehabilitation centers. The company charges clients based on a fee-for-service model, where revenue is derived from contracted service agreements that outline specific service expectations and pricing. Key revenue streams include daily service fees for housekeeping and dietary services, as well as additional charges for specialized services or equipment. HCSG also benefits from long-term contracts, which provide stable and predictable income. Significant partnerships with healthcare organizations and an emphasis on compliance with health and safety regulations further enhance HCSG's market position and contribute to its earnings.

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	193.84M	230.57M	267.99M
EBITDA	72.20M	73.96M	75.21M	62.94M	77.88M	144.83M
Net Income	39.73M	39.47M	38.39M	34.24M	48.54M	98.68M
Balance Sheet
Total Assets	804.30M	802.77M	790.65M	718.33M	777.53M	785.03M
Cash, Cash Equivalents and Short-Term Investments	177.46M	107.31M	147.46M	121.48M	185.19M	264.34M
Total Debt	6.22M	16.45M	36.23M	33.10M	17.80M	16.66M
Total Liabilities	201.86M	302.85M	334.04M	292.16M	324.85M	304.57M
Stockholders Equity	602.44M	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: 18.81
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• 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 18.81 is above the 20-day moving average (MA) of 16.94, above the 50-day MA of 16.33, and above the 200-day MA of 13.53, indicating a bullish trend. The MACD of 0.78 indicates Negative momentum. The RSI at 68.35 is Neutral, neither overbought nor oversold. The STOCH value of 74.31 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
NHC	―	$1.87B	18.19	10.65%	2.07%	25.19%	13.44%
MD	―	$1.56B	13.89	14.27%	―	-3.08%	―
HCSG	―	$1.33B	34.81	8.07%	―	6.26%	-19.33%
PNTG	―	$872.34M	32.28	11.44%	―	30.58%	24.86%
AVAH	―	$2.06B	131.12	―	―	11.53%	―
AMN	―	$790.63M	―	-40.13%	―	-14.33%	-398.68%
Sector *	―	$7.86B	-0.30	-43.30%	2.27%	22.53%	-2.21%

Healthcare Services Corporate Events

Healthcare Services Group Reports Strong Q3 Earnings

Healthcare Services Group’s recent earnings call painted a picture of robust financial health, marked by impressive revenue growth, strong cash flow, and high client retention rates. The sentiment was generally positive, with optimism about labor market conditions and a strategic share buyback program. However, challenges remain, particularly concerning Genesis Healthcare’s bankruptcy and increased SG&A expenses.

Healthcare Services Group Surpasses Q3 Expectations

Healthcare Services Group, Inc. is a prominent provider of housekeeping, laundry, dining, and nutritional services within the healthcare industry, known for its nearly five decades of experience in enhancing operational, regulatory, and financial outcomes for its clients.