Select Medical (SEM) AI Stock Analysis

• Market Cap: $2.02B
• Dividend Yield: 1.69%
• Average Volume (3M): 1.19M
• Price to Earnings (P/E): 12.5
• Beta (1Y): 0.86
• Revenue Growth: -22.96%
• EPS Growth: -59.35%
• Country: US
• Employees: 30,000
• Sector: Healthcare
• Sector Strength: 45
• Industry: Medical - Care Facilities
• EPS (TTM): 0.16
• Shares Outstanding: 124,018,300
• 10 Day Avg. Volume: 1,406,764
• 30 Day Avg. Volume: 1,192,837
• PEG Ratio: -0.43
• Price to Book (P/B): 1.08
• Price to Sales (P/S): 0.34
• P/FCF Ratio: 4.79
• Enterprise Value/Market Cap: 2.82
• Enterprise Value/Revenue: 1.04
• Enterprise Value/Gross Profit: 9.60
• Enterprise Value/Ebitda: 10.73
• 1Y Price Target: $16.50
• Price Target Upside: 1.54% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 3
• EPS Forecast (FY): 1.26
• Revenue Forecast (FY): $5.69B

• Rating: 62 Neutral
• Price Target: $16.00 ▼(-1.54% Downside)
• Action: Reiterated Date: 03/04/26
• Date: Action: Reiterated 03/04/26

The score is driven primarily by mixed financial performance—improving leverage and solid cash generation offset by meaningful 2025 margin/earnings deterioration. Technical indicators lean bearish in the near term. Valuation is supportive, while the earnings call was mixed (constructive 2026 outlook but significant outpatient and cost headwinds). The announced go-private transaction is a notable positive catalyst.

Positive Factors

Balance-sheet deleveraging

Material deleveraging has materially de-risked the capital structure, lowering interest and covenant pressure. Over the next 2–6 months this enhances financial flexibility to fund bed growth, absorb operating volatility, and execute on strategic initiatives with less refinancing risk.

Strong free cash flow conversion

Consistent FCF conversion above net income demonstrates durable cash generation that can fund capex, dividend distributions, and further debt paydown. Robust cash flow versus earnings supports sustained investment in rehab development and cushions cyclical reimbursement shocks.

Inpatient rehab growth & bed pipeline

High-growth, higher-margin inpatient rehab outperformance and a multi-year bed development pipeline provide durable revenue and profitability upside. Expansions and JV openings deepen system relationships and increase exposure to a stronger reimbursement mix versus outpatient services.

Negative Factors

Outpatient profitability collapse

A near-60% drop in outpatient EBITDA reflects structural reimbursement pressure, unfavorable payer mix and higher variable discounts. Given outpatient's role in diversification, sustained weakness or slower recovery in volumes/margins will continue to depress consolidated profitability and cash flow.

Margin deterioration and earnings quality

Sharp margin erosion despite revenue growth signals weakening earnings quality. Persistently compressed margins reduce return on capital, limit internal funding for growth, and make results more sensitive to reimbursement shifts and cost shocks over the medium term.

Elevated leverage and limited cash liquidity

Although leverage has improved, absolute debt and minimal cash on hand leave the company exposed to operational or interest-rate stress and constrain capital allocation flexibility. This limits tactical responses to prolonged outpatient weakness or unexpected cost inflation.

Select Medical Business Overview & Revenue Model

Company Description

Select Medical Holdings Corporation, through its subsidiaries, operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States. The company's Critical Illness Recovery Hospital segment consists of hospitals that provide services for heart failure, infectious disease, respiratory failure and pulmonary disease, surgery requiring prolonged recovery, renal disease, neurological events, and trauma. Its Rehabilitation Hospital segment offers therapy and rehabilitation treatments, including rehabilitative services for brain and spinal cord injuries, strokes, amputations, neurological disorders, orthopedic conditions, pediatric congenital or acquired disabilities, and cancer. The company's Outpatient Rehabilitation segment operates rehabilitation clinics that provide physical, occupational, and speech rehabilitation programs and services; and specialized programs, such as functional programs for work related injuries, hand therapy, post-concussion rehabilitation, pediatric and cancer rehabilitation, and athletic training services. Its Concentra segment operates and provides occupational health centers and contract services at employer worksites that deliver occupational medicine, consumer health, physical therapy, and wellness services. As of December 31, 2021, the company operated 104 critical illness recovery hospitals in 28 states; 30 rehabilitation hospitals in 12 states; 1,881 outpatient rehabilitation clinics in 38 states and the District of Columbia; and 518 occupational health centers in 41 states, and 134 onsite clinics at employer worksites states. Select Medical Holdings Corporation was founded in 1996 and is headquartered in Mechanicsburg, Pennsylvania.

How the Company Makes Money

Select Medical generates revenue through multiple streams, primarily from the operations of its long-term acute care hospitals and outpatient rehabilitation clinics. Revenue is derived from patient care services, which includes billing for acute care hospital stays, physical and occupational therapy sessions, and other medical services provided to patients. The company also receives reimbursements from government programs like Medicare and Medicaid, as well as private insurance companies. Significant partnerships with healthcare providers and payers enhance their revenue potential, while strategic acquisitions of healthcare facilities further expand their operational footprint. In addition, Select Medical's focus on improving patient outcomes and reducing hospital readmission rates is integral to maintaining a sustainable revenue model.

Select Medical Financial Statement Overview

Summary

Mixed fundamentals. Stronger balance-sheet positioning from meaningful deleveraging and solid recent cash conversion (FCF exceeding net income) support flexibility, but 2025 saw sharp margin/EBIT compression and weaker earnings quality despite strong revenue growth.

Income Statement

Revenue rebounded in 2025 (up ~39% year over year), but profitability deteriorated sharply. Gross margin and EBITDA margin compressed versus prior years, and EBIT fell close to break-even, with net margin down to ~2.7% from ~4.1% in 2024 and ~6.5% in 2021. Overall, the top-line trajectory is positive most recently, but earnings quality and margin stability are clear weaknesses.

Balance Sheet

Leverage improved meaningfully in 2025, with debt-to-equity dropping to ~0.6x from very elevated levels in 2021–2023 (over ~3–4x), suggesting a materially de-risked capital structure. Equity and assets are steady, and return on equity remains positive, though it has come down with weaker earnings. Strength is the sharp deleveraging; weakness is that returns have trended lower as profitability cooled.

Cash Flow

Cash generation is a relative bright spot: free cash flow exceeds net income in 2024 and 2025 (roughly ~1.0x–1.1x), indicating solid cash conversion. Free cash flow growth accelerated strongly in 2025, and operating cash flow remains positive. The key weakness is volatility across the period (notably weaker free cash flow in 2022 and lower operating cash flow versus 2020 highs).

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	5.45B	5.19B	6.66B	6.33B	6.20B
Gross Profit	629.29M	633.64M	932.04M	733.38M	919.37M
EBITDA	530.63M	507.27M	789.74M	635.51M	968.35M
Net Income	146.22M	214.04M	243.49M	158.99M	402.23M
Balance Sheet
Total Assets	5.85B	5.61B	7.69B	7.67B	7.36B
Cash, Cash Equivalents and Short-Term Investments	26.52M	59.69M	111.59M	172.76M	74.31M
Total Debt	3.70B	2.70B	4.52B	5.16B	4.76B
Total Liabilities	3.82B	3.61B	6.12B	6.27B	6.00B
Stockholders Equity	1.71B	1.68B	1.29B	1.12B	1.11B
Cash Flow
Free Cash Flow	382.74M	539.65M	352.86M	94.45M	220.69M
Operating Cash Flow	346.47M	517.86M	582.06M	284.82M	401.23M
Investing Cash Flow	-216.49M	-231.01M	-268.48M	-226.34M	-256.59M
Financing Cash Flow	-163.15M	-311.17M	-327.48M	-34.89M	-647.38M

Select Medical Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 16.25
• 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 SEM, the sentiment is Positive. The current price of 16.25 is above the 20-day moving average (MA) of 15.57, above the 50-day MA of 15.23, and above the 200-day MA of 14.16, indicating a bullish trend. The MACD of 0.08 indicates Negative momentum. The RSI at 64.71 is Neutral, neither overbought nor oversold. The STOCH value of 72.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SEM.

Select Medical Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NHC	78 Outperform	$2.69B	17.67	9.94%	1.80%	23.74%	-18.99%
SEM	62 Neutral	$2.02B	12.54	5.57%	1.69%	-22.96%	-59.35%
ASTH	62 Neutral	$1.28B	54.15	3.01%	―	68.17%	-85.42%
BKD	58 Neutral	$3.58B	-9.62	-214.33%	―	3.93%	-42.22%
MD	54 Neutral	$1.64B	11.03	20.28%	―	-4.21%	―
AVAH	52 Neutral	$1.52B	32.50	―	―	15.48%	―
Sector *	51 Neutral	$7.86B	-0.30	-43.30%	2.27%	22.53%	-2.21%

Select Medical Corporate Events

Select Medical agrees to go-private buyout transaction

On March 2, 2026, Select Medical Holdings Corporation announced it had entered a definitive agreement to be taken private by a consortium led by Executive Chairman and co‑founder Robert A. Ortenzio, senior executive Martin F. Jackson and private equity firm Welsh, Carson, Anderson & Stowe. The buyer group agreed to acquire all outstanding shares not already owned by the consortium for $16.50 per share in cash, implying an enterprise value of about $3.9 billion and representing premiums of roughly 18% to the company’s unaffected share price on November 24, 2025 and 25% to its 90‑day volume‑weighted average price.

A special committee of disinterested directors, advised by independent financial and legal advisers, unanimously deemed the deal fair to unaffiliated shareholders and recommended it to the board, which in turn unanimously backed the merger and urged investors to vote in favor. The transaction, expected to close in mid‑2026 pending approval by a majority of unaffiliated shareholders and customary antitrust and other regulatory clearances, would see certain insiders roll over about 11.8% of the equity, keep current management in place and leave existing debt outstanding, while resulting in Select Medical being delisted from the New York Stock Exchange and becoming a privately held company.

The financing package combines committed equity from WCAS and debt arranged by J.P. Morgan and Wells Fargo, and the merger agreement includes reverse and standard termination fees and specific‑performance provisions to enforce closing. For shareholders and creditors, the deal locks in a cash premium and signals a shift toward private ownership under sponsor control, potentially giving management more flexibility to pursue long‑term operational and strategic initiatives away from public markets, while concentrating governance influence with the lead executives and their private equity backer.

The most recent analyst rating on (SEM) stock is a Hold with a $16.50 price target. To see the full list of analyst forecasts on Select Medical stock, see the SEM Stock Forecast page.

Select Medical Declares Quarterly Dividend Amid Solid Results

Select Medical reported stronger financial performance for the fourth quarter and full year ended December 31, 2025, with quarterly revenue up 6.4% to $1.40 billion and full-year revenue up 5.1% to $5.45 billion. Income from continuing operations surged in both periods, aided by the absence of 2024 one-time charges tied to the November 25, 2024 tax-free spin-off of Concentra, though Adjusted EBITDA declined modestly year over year.

Segment results were mixed, with rehabilitation hospitals delivering double-digit revenue and EBITDA growth, critical illness recovery hospitals showing modest revenue gains but margin compression, and outpatient rehabilitation posting slight revenue growth. On November 24, 2025, Executive Chairman and co-founder Robert A. Ortenzio made a non-binding proposal to take the company private at $16.00–$16.20 per share, prompting the board’s independent special committee to review the offer and evaluate broader strategic alternatives, while the board also declared a quarterly cash dividend of $0.0625 per share on February 12, 2026 for payment in March 2026.

The most recent analyst rating on (SEM) stock is a Buy with a $16.50 price target. To see the full list of analyst forecasts on Select Medical stock, see the SEM Stock Forecast page.

Select Medical renews CEO Mullin under new agreement

On December 17, 2025, Select Medical Corporation entered into a new employment agreement with its Chief Executive Officer, Thomas P. Mullin, effective January 1, 2026, under which he will continue as CEO for an initial one-year term with automatic one-year renewals, receiving an annual base salary of $700,000 and being subject to non-competition and non-solicitation restrictions during employment and for two years after. The agreement also provides that if Mullin is terminated by Select without cause and not due to death or disability, he will receive severance equal to 12 months of base salary, and the company confirmed there are no related-party, family, or other arrangements requiring additional regulatory disclosure, signaling a straightforward, governance-compliant leadership continuity arrangement for stakeholders.

The most recent analyst rating on (SEM) stock is a Buy with a $16.50 price target. To see the full list of analyst forecasts on Select Medical stock, see the SEM Stock Forecast page.