Select Medical (SEM) AI Stock Analysis

• Market Cap: $1.83B
• Dividend Yield: 3.07%
• Average Volume (3M): 1.11M
• Price to Earnings (P/E): 10.6
• Beta (1Y): 0.74
• Revenue Growth: -8.86%
• EPS Growth: -36.22%
• Country: US
• Employees: 30,000
• Sector: Healthcare
• Sector Strength: 60
• Industry: Medical - Care Facilities
• EPS (TTM): 0.44
• Shares Outstanding: 128,538,900
• 10 Day Avg. Volume: 1,405,414
• 30 Day Avg. Volume: 1,106,730
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 2.84
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 8.22
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $20.80
• Price Target Upside: 40.92% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 5

Select Medical's overall score reflects moderate financial performance with strong cash flow. The stock is undervalued with a decent dividend yield, but technical indicators suggest a downward trend in the short term. Despite growth in certain divisions, regulatory challenges and adverse weather have impacted performance. The company's strategic growth plans and positive earnings guidance provide a balanced outlook.

Positive Factors

Financial Performance

The company demonstrated strong growth with revenue, Adj EBITDA, and Adj EPS increasing by 8%, 4%, and 50%, respectively.

Market Position and Valuation

SEM is an attractive long-term investment opportunity given the company’s leading position in the post-acute continuum of care, attractive growth profile, improved leverage profile and attractive valuation.

Strategic 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.

Negative Factors

High-Cost Outlier Threshold Impact

Two-thirds of the AEBITDA miss was mainly due to another significant increase in the high-cost outlier threshold that was more impactful than expected during the quarter with highest acuity cases.

Outpatient Rehab Rate Decrease

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

Reimbursement Challenges

The lower guidance largely reflects the 1Q miss, the majority of which is due to Critical Illness Recovery Hospitals where reimbursement was penalized in its seasonally biggest quarter with highest acuity cases.

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 exhibits moderate profitability with a strong cash flow generation capability. Despite this, the company faces challenges due to revenue fluctuations and high leverage, which pose risks if not managed. Shareholder returns are decent, but the financial health could be impacted by high debt levels.

Income Statement

The company's revenue has shown fluctuations, with a decline in TTM compared to prior years. Gross profit margin for TTM stands at 8.75%, and the net profit margin is 3.66%. EBIT and EBITDA margins are 3.94% and 7.03% respectively. These indicate moderate profitability but with room for improvement in operational efficiency.

Balance Sheet

The debt-to-equity ratio is high, reflecting significant leverage, which poses a potential risk if revenue declines. ROE for TTM is 10.11%, indicating decent shareholder returns, and the equity ratio is 30.19%, suggesting a moderate level of stability in the capital structure.

Cash Flow

The cash flow statement reveals a strong operating cash flow relative to net income, indicating good cash generation capability. While free cash flow has decreased, the operating cash flow to net income ratio is robust, highlighting efficiency in converting income into cash.

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
510.23M	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
2.70B	4.96B	5.12B	4.72B	4.50B
	Net Debt
2.64B	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: 14.76
• 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 14.76 is below the 20-day moving average (MA) of 16.52, below the 50-day MA of 16.97, and below the 200-day MA of 18.53, indicating a bearish trend. The MACD of -0.15 indicates Positive momentum. The RSI at 37.43 is Neutral, neither overbought nor oversold. The STOCH value of 36.82 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
ASTH	73 Outperform	$1.82B	36.02	6.50%	―	46.72%	-30.24%
NHC	73 Outperform	$1.49B	14.72	10.79%	2.54%	15.25%	51.77%
SGRY	66 Neutral	$2.96B	―	-8.90%	―	13.52%	-1296.44%
SEM	64 Neutral	$1.83B	10.61	10.38%	3.07%	-8.86%	-36.22%
ACHC	60 Neutral	$2.15B	8.22	8.73%	―	7.69%	―
LFST	58 Neutral	$2.64B	―	-4.00%	―	18.50%	69.93%
Sector *	52 Neutral	$5.35B	3.83	-41.61%	2.85%	17.10%	1.22%

Select Medical Corporate Events

Select Medical Stockholders Approve Key Proposals at Meeting

On April 24, 2025, Select Medical Holdings Corporation held its annual meeting where stockholders approved the Non-Employee Director Compensation Policy, which includes cash and equity compensation for non-employee directors. Additionally, stockholders approved several proposals, including the election of four Class I Directors, an amendment to eliminate supermajority voting requirements, and the ratification of PricewaterhouseCoopers LLP as the independent accounting firm for 2025.

Spark’s Take on SEM Stock

According to Spark, TipRanks’ AI Analyst, SEM is a Neutral.

Select Medical’s overall stock score reflects strong cash flow generation and a positive valuation perspective. However, challenges in revenue growth and profitability, along with mixed technical indicators, moderate the score. The earnings call provided optimistic guidance, but noted difficulties in certain divisions, impacting overall sentiment.

To see Spark’s full report on SEM stock, click here.