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Healthcare Services (HCSG)
NASDAQ:HCSG
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Healthcare Services
(NASDAQ:HCSG)
73Outperform
Positive Factors
Financial Performance
HCSG's first quarter results exceeded expectations in revenues, EPS, and adjusted EBITDA, marking its best performance in five years.
Market Opportunities
HCSG is expected to benefit from an improving nursing home industry, strong retention, new customer adds, and cross-selling opportunities.
Negative Factors
Client Industry Challenges
Client industry challenges have affected collections and margins.
Growth Prospects
HCSG's tepid growth prospect and elevated payment cycle limit multiple expansion despite improving business conditions.
Healthcare Services (HCSG) vs. S&P 500 (SPY)
Market Cap
$1.08B
Dividend YieldN/A
Average Volume (3M)725.22K
Price to Earnings (P/E)26.4
Beta (1Y)0.87
Revenue Growth3.71%
EPS Growth1.32%
CountryUS
Employees35,300
SectorHealthcare
Sector Strength56
IndustryMedical - Care Facilities
Share Statistics
EPS (TTM)0.56
Shares Outstanding72,918,630
10 Day Avg. Volume1,199,297
30 Day Avg. Volume725,223
Financial Highlights & Ratios
PEG Ratio20.07
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap0.57
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit2.67
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$14.75Price Target Upside-0.20% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering5
Healthcare Services Business Overview & Revenue Model
Company DescriptionHealthcare Services Group, Inc. (HCSG) is a prominent provider of management, administrative, and operational support services to the healthcare industry, particularly long-term care facilities and hospitals. The company specializes in offering housekeeping, laundry, linen, facility maintenance, and dietary services, enabling healthcare institutions to focus on patient care while outsourcing essential support functions. HCSG operates across the United States, serving a diverse clientele with tailored solutions that enhance operational efficiency and compliance with healthcare regulations.
How the Company Makes MoneyHealthcare Services Group, Inc. generates revenue primarily through service contracts with healthcare facilities, including nursing homes, rehabilitation centers, and hospitals. These contracts typically involve long-term agreements where HCSG provides comprehensive housekeeping, laundry, and dietary services. The company charges its clients a fee for these services, often based on the size of the facility or the scope of services provided. HCSG's revenue model benefits from economies of scale, which allows it to offer competitive pricing while maintaining profitability. Additionally, HCSG may engage in strategic partnerships with healthcare organizations to expand its service offerings and reach new markets, further contributing to its revenue streams.
Healthcare Services Financial Statement Overview
Summary
Healthcare Services demonstrates a stable financial position with consistent revenue growth, strong operational efficiency, and excellent cash flow management. The company maintains a low leverage balance sheet, positioning itself well within the Medical - Care Facilities industry. However, there is room for enhancing net profitability.Income Statement
Healthcare Services shows solid profitability with a Gross Profit Margin of 37.0% for TTM, indicating efficient cost management. The Net Profit Margin is modest at 2.38%, suggesting room for improved efficiency. Revenue Growth Rate is positive, showing a 1.41% increase from the previous year, indicating stable growth despite industry challenges. However, the EBIT Margin is strong at 24.9%, reflecting good operational control. Overall, the income statement reflects a stable financial performance with potential for growth in profitability.―
Balance Sheet
The company maintains a strong balance sheet with a low Debt-to-Equity Ratio of 0.015, indicating minimal leverage and financial stability. The Return on Equity (ROE) is 8.05%, showcasing effective utilization of equity to generate profits. The Equity Ratio of 62.5% suggests a robust capital structure with significant equity financing. Overall, the balance sheet demonstrates financial health and low risk exposure.82
Cash Flow
Healthcare Services exhibits a strong Free Cash Flow Growth Rate of 220.65%, indicating improved cash generation capabilities. The Operating Cash Flow to Net Income Ratio is 2.04, highlighting efficient cash conversion from operations. However, the Free Cash Flow to Net Income Ratio is 1.90, suggesting strong cash retention for investments. While cash flows are robust, maintaining this growth trajectory is crucial for future stability.―
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.72B | 1.67B | 1.69B | 1.64B | 1.76B | Gross Profit |
| 228.09M | 214.75M | 193.84M | 226.88M | 267.99M | EBIT |
| 53.27M | 62.36M | 53.50M | 31.05M | 90.96M | EBITDA |
| 73.96M | 75.21M | 62.94M | 77.88M | 144.83M | Net Income Common Stockholders |
| 39.47M | 38.39M | 34.24M | 48.54M | 98.68M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 107.31M | 147.46M | 121.48M | 185.19M | 264.34M | Total Assets |
| 802.77M | 790.65M | 718.33M | 777.53M | 785.03M | Total Debt |
| 8.03M | 36.23M | 33.10M | 11.30M | 11.36M | Net Debt |
| -48.74M | -18.09M | 6.82M | -59.49M | -127.97M | Total Liabilities |
| 302.85M | 334.04M | 292.16M | 324.85M | 304.57M | Stockholders Equity |
| 499.93M | 456.62M | 426.17M | 452.68M | 480.46M |
| Cash Flow | Free Cash Flow | |||
| 24.47M | 38.09M | -13.38M | 31.42M | 212.87M | Operating Cash Flow |
| 30.80M | 43.50M | -8.17M | 37.11M | 217.21M | Investing Cash Flow |
| 6.05M | -3.29M | 2.58M | -22.99M | -36.84M | Financing Cash Flow |
| -31.05M | -12.15M | -38.93M | -82.65M | -68.37M |
Healthcare Services Technical Analysis
Positive
14.78
Price Trends
10.87
Positive
11.19
Positive
11.13
Positive
Market Momentum
1.11
Negative
84.63
Negative
99.27
Negative
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 14.78 is above the 20-day moving average (MA) of 11.36, above the 50-day MA of 10.87, and above the 200-day MA of 11.13, indicating a bullish trend. The MACD of 1.11 indicates Negative momentum. The RSI at 84.63 is Negative, neither overbought nor oversold. The STOCH value of 99.27 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for HCSG.
Healthcare Services Risk Analysis
Healthcare Services disclosed 23 risk factors in its most recent earnings report. Healthcare Services reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Healthcare Services Peers Comparison
Overall Rating
UnderperformOutperform
Sector (52)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
73 Outperform | $1.08B | 26.41 | 8.37% | ― | 3.71% | 1.32% | |
69 Neutral | $926.74M | 37.75 | 10.40% | ― | 27.59% | 61.97% | |
68 Neutral | $1.49B | 14.72 | 10.79% | 2.54% | 15.25% | 51.77% | |
52 Neutral | $5.35B | 3.81 | -42.57% | 2.86% | 17.10% | 1.33% | |
50 Neutral | $811.38M | 18.62 | -19.11% | ― | -21.26% | -172.28% | |
49 Neutral | $1.11B | ― | -12.28% | ― | 0.92% | -65.03% | |
49 Neutral | $944.25M | ― | 42.49% | ― | 6.82% | 92.03% |
* Healthcare Sector Average
Performance Comparison
HCSG
Healthcare Services
14.78
3.95
36.47%
AMN
AMN Healthcare Services
19.88
-40.04
-66.82%
MD
Pediatrix Medical Group
12.95
3.67
39.55%
NHC
National Healthcare
94.10
3.00
3.29%
PNTG
Pennant Group
26.69
5.12
23.74%
AVAH
Aveanna Healthcare Holdings
4.84
2.47
104.22%
Healthcare Services Earnings Call Summary
Earnings Call Date:Apr 23, 2025
(Q1-2025)
| % Change Since: 57.07%|
Next Earnings Date:Jul 23, 2025
Earnings Call Sentiment Positive
The earnings call reflects a generally positive outlook, highlighted by record revenue and cash flow, strong balance sheet, and favorable industry trends. However, challenges remain with food inflation and labor market issues, and Q2 revenue growth guidance is conservative.Q1-2025 Updates
Positive Updates
Record Revenue and Cash Flows
First-quarter revenue of $447.7 million, an increase of 5.7% over the prior year, and cash flows were the best in five years.
Strong Balance Sheet
Cash and marketable securities of $143.9 million and a $500 million credit facility, with steps taken to reduce interest expense.
Positive Industry Trends
Workforce availability and occupancy continue to grow, with stable reimbursement environment and favorable regulatory changes.
Increased Cash Flow Guidance
Raised 2025 cash flow from operations expectations from $45-$60 million to $60-$75 million.
Opportunistic Share Repurchases
Repurchased approximately $7 million of common stock in Q1, with a total buyback of about $23 million since February 2023.
Tuck-in Acquisition
A small acquisition was made, expected to add about 1% to 2025 revenue.
Negative Updates
Food Inflation
Food at home inflation increased sequentially, showing 1% inflation in Q1, with January and March at 50 basis points.
Lingering Labor Market Challenges
Although improving, some markets still face ongoing labor challenges, though overall industry trends are positive.
Flat Sequential Revenue Growth Guidance
Q2 revenue guidance suggests a small $3 million step-up, implying relatively flat sequential growth excluding acquisition impact.
Company Guidance
During the Healthcare Services Group, Inc.'s First Quarter 2025 Earnings Call, several key metrics and projections were shared. The company reported a revenue of $447.7 million for the quarter, marking a 5.7% increase compared to the previous year. Net income stood at $17.2 million, with diluted EPS at $0.23. Cash flow from operations, excluding the change in payroll accrual, was $32.1 million, showing a $41.3 million increase from the prior year. The company projects Q2 revenue to range between $445 million and $455 million and anticipates sequential revenue growth in the latter half of the year. Cost of services was 84.8%, with a goal to manage it within the 86% range for 2025. SG&A expenses were reported at $46.4 million, targeting a 9.5% to 10.5% range in the near term. Cash and marketable securities were $143.9 million, along with a $500 million credit facility. The quarter also benefited from a $12.2 million receipt of CARES Act-related employee retention credits, contributing to an increase in the cash flow from operations guidance to a range of $60 to $75 million for 2025.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.