While Select Medical Holdings Corporation (NYSE:SEM) might not have the largest market cap around , it saw a decent share price growth of 17% on the NYSE over the last few months. While good news for shareholders, the company has traded much higher in the past year. As a well-established company, which tends to be well-covered by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Let's take a look at Select Medical Holdings's outlook and value based on the most recent financial data to see if the opportunity still exists.
What Is Select Medical Holdings Worth?
Great news for investors – Select Medical Holdings is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Select Medical Holdings's ratio of 16.42x is below its peer average of 28.7x, which indicates the stock is trading at a lower price compared to the Healthcare industry. However, given that Select Medical Holdings's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Select Medical Holdings look like?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. Though in the case of Select Medical Holdings, it is expected to deliver a negative earnings growth of -5.3%, which doesn't help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What This Means For You
Are you a shareholder? Although SEM is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. We recommend you think about whether you want to increase your portfolio exposure to SEM, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you've been keeping an eye on SEM for a while, but hesitant on making the leap, we recommend you research further into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. Every company has risks, and we've spotted 4 warning signs for Select Medical Holdings (of which 2 are significant!) you should know about.
If you are no longer interested in Select Medical Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
