Select Medical (SEM) AI Stock Analysis

• Market Cap: $2.35B
• Dividend Yield: 2.75%
• Average Volume (3M): 957.23K
• Price to Earnings (P/E): 11.0
• Beta (1Y): 0.98
• Revenue Growth: -0.63%
• EPS Growth: -13.10%
• Country: US
• Employees: 38,400
• Sector: Healthcare
• Sector Strength: 74
• Industry: Healthcare Providers & Services
• EPS (TTM): 1.66
• Shares Outstanding: 128,962,840
• 10 Day Avg. Volume: 1,383,123
• 30 Day Avg. Volume: 957,233
• PEG Ratio: 0.40
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.45
• Price to Cash Flow (P/CF): 4.70
• P/FCF Ratio: 5.20
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $23.33
• Price Target Upside: 32.03% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 3

Select Medical's score of 65.85 reflects its robust cash flow generation and strategic expansions balanced against revenue contraction and declining margins. The stock's undervaluation presents potential upside, but technical indicators suggest caution with current momentum.

Positive Factors

Inpatient Rehab Expansion

Select Medical is expanding its highest margin segment, Inpatient Rehab, by adding 455 beds, which is expected to lead to double-digit segment AEBITDA growth.

Stock Rating

The analyst is lifting the rating to Buy, indicating a positive outlook on the stock.

Negative Factors

Medicare Fee Schedule

Outpatient Rehab faces a rate decrease under the Medicare Physician Fee schedule.

Select Medical Business Overview & Revenue Model

Company Description

Select Medical Holdings Corporation (SEM) is a prominent provider of healthcare services in the United States. The company operates through several key sectors including specialty hospitals, outpatient rehabilitation clinics, and occupational health centers. Its core services encompass long-term acute care, inpatient rehabilitation, and outpatient physical therapy, catering to a wide range of patients with diverse medical needs.

How the Company Makes Money

Select Medical generates revenue primarily through its extensive network of specialty hospitals and rehabilitation centers. The company earns money by providing medical services to patients, billing insurance companies, government programs like Medicare and Medicaid, as well as direct payments from patients. Key revenue streams include long-term acute care hospitals (LTACHs), inpatient rehabilitation facilities (IRFs), and outpatient physical therapy centers. Furthermore, Select Medical has strategic partnerships and affiliations with healthcare providers and organizations, which enhance its service offerings and contribute to its financial performance.

Select Medical Financial Statement Overview

Summary

Select Medical shows strong cash flow generation with a 52.9% increase in free cash flow but faces challenges in revenue growth and declining margins. The company has reduced leverage, but profitability remains a concern.

Income Statement

Select Medical's income statement reveals a mixed performance. The company experienced a decline in total revenue in 2024 compared to 2023, indicating a revenue contraction of around 22%. Gross profit margin and net profit margin for 2024 were approximately 12.2% and 4.1%, respectively, showing a decline compared to previous years' performance. However, the EBITDA margin remained relatively stable at 5.3%. Despite the revenue decline, the company maintained some level of profitability, but the lower EBIT margin of 0.1% in 2024 suggests potential operational efficiency issues.

Balance Sheet

The balance sheet presents a stable yet leveraged structure. The debt-to-equity ratio for 2024 is approximately 0.59, showing a reduction from previous years and indicating a decrease in leverage. The equity ratio is 30%, reflecting a stable equity position relative to total assets. However, the return on equity (ROE) of 12.7% in 2024 indicates a decrease in profitability relative to shareholder equity compared to prior years. Overall, the company shows signs of managing its debt but needs to improve profitability to enhance shareholder returns.

Cash Flow

Select Medical's cash flow statement highlights strong cash generation capabilities. The free cash flow in 2024 increased by 52.9% compared to 2023, reflecting effective cash management and operational efficiency. The operating cash flow to net income ratio of 2.42 signifies strong cash flow relative to net income, suggesting robust cash conversion. The free cash flow to net income ratio is 2.52, indicating that the company is generating substantial free cash flow relative to its net earnings, which is a positive sign for liquidity and potential reinvestment opportunities.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
5.19B	6.66B	6.33B	6.20B	5.53B
	Gross Profit
633.64M	932.04M	733.38M	919.37M	821.34M
	EBIT
268.31M	554.87M	403.28M	713.77M	567.66M
	EBITDA
507.27M	789.74M	585.31M	772.72M	683.30M
	Net Income Common Stockholders
214.04M	243.49M	158.99M	402.23M	259.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
59.69M	142.97M	97.91M	74.31M	577.06M
	Total Assets
5.61B	7.69B	7.67B	7.36B	7.66B
	Total Debt
986.99M	4.96B	5.12B	4.72B	4.50B
	Net Debt
927.30M	4.88B	5.03B	4.65B	3.92B
	Total Liabilities
3.61B	6.12B	6.31B	6.03B	6.40B
	Stockholders Equity
1.68B	1.29B	1.32B	1.33B	1.06B
Cash Flow		Free Cash Flow
539.65M	352.86M	94.45M	220.69M	881.63M
	Operating Cash Flow
517.86M	582.06M	284.82M	401.23M	1.03B
	Investing Cash Flow
-231.01M	-268.48M	-226.34M	-256.59M	-115.35M
	Financing Cash Flow
-311.17M	-327.48M	-34.89M	-647.38M	-671.54M

Select Medical Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 17.67
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SEM, the sentiment is Negative. The current price of 17.67 is below the 20-day moving average (MA) of 18.73, below the 50-day MA of 18.93, and below the 200-day MA of 18.91, indicating a bearish trend. The MACD of -0.33 indicates Positive momentum. The RSI at 39.52 is Neutral, neither overbought nor oversold. The STOCH value of 51.65 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SEM.

Select Medical Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
UHS	74 Outperform	$11.39B	10.42	16.92%	0.46%	10.82%	65.64%
THC	72 Outperform	$11.67B	3.81	76.72%	―	0.57%	440.71%
SEM	66 Neutral	$2.35B	10.98	12.73%	2.75%	-0.63%	-13.10%
HCA	65 Neutral	$77.50B	14.18	-230.22%	0.85%	8.67%	15.32%
ACHC	61 Neutral	$2.79B	10.54	8.32%	―	7.69%	―
CYH	52 Neutral	$418.16M	―	39.18%	―	1.16%	-278.41%
Sector *	49 Neutral	$7.05B	0.34	-55.09%	2.46%	25.27%	-3.43%

Select Medical Corporate Events

Select Medical Refines Financial Strategy with New Offerings

Select Medical Corporation is set to offer $850 million in senior notes due 2032, guaranteed by its subsidiaries, to refinance existing debt and make strategic financial amendments. The move includes a new $750 million term loan and extending credit facilities, while the notes will be sold privately to institutional buyers. This financial maneuver aims to strengthen Select Medical’s market position amidst fluctuating economic conditions and regulatory challenges.