Surgery Partners (SGRY): Is the Current Valuation a Chance for Long-Term Investors?

Surgery Partners (SGRY) has caught the eye of investors lately, with its stock experiencing a series of declines across varying timeframes. While there has not been a single high-profile event driving this movement, the recent slide may prompt shareholders and would-be buyers to wonder whether this downward drift is signaling a longer-term shift or just noise in an otherwise resilient business.

Over the past year, Surgery Partners' stock has slid around 30%, with modest short-term losses adding pressure. The past few months have done little to reverse that, and while shares are up slightly this year, they remain well below levels seen just a year ago. Outside of share prices, the company reported healthy revenue growth alongside a significant uptick in net income, which might raise eyebrows given the market’s muted response.

With all this recent volatility and mixed financial signals, the question becomes whether the current pricing reflects compelling value or if the market is simply ahead of the company’s future prospects.

Most Popular Narrative: 30.8% Undervalued

According to the most widely followed narrative, Surgery Partners appears notably undervalued, with consensus suggesting shares trade at a significant discount to their fair value based on future earnings and margin potential.

Recent and proposed regulatory changes (such as CMS expanding the ASC covered procedure list, phasing out the inpatient-only list, and supporting site-of-care neutrality) are expected to further expand the company's addressable market. This could allow more complex and higher-reimbursement procedures to move into their centers, which should positively affect revenue and earnings growth.

Curious about why analysts see so much upside for Surgery Partners? There are bold growth assumptions built into this valuation. Whispers of faster revenue, rising margins, and ambitious profit forecasts set the stage. Want to find out what specific projections fuel this bullish price target? Unlock the details behind the financial engine that is driving this big gap between market price and potential value.

Result: Fair Value of $31 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising interest costs and slower than anticipated acquisitions could quickly challenge these optimistic assumptions if conditions do not improve soon.

Find out about the key risks to this Surgery Partners narrative.

Another View: Discounted Cash Flow Perspective

Taking a step back from analyst targets, our DCF model paints a similar picture. This indicates that Surgery Partners remains undervalued as of today. Could the real opportunity be even greater than the market expects?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Surgery Partners for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Surgery Partners Narrative

If the current outlook does not fit your perspective or you enjoy forming your own conclusions, you can easily shape your own within just a few minutes. Do it your way

A great starting point for your Surgery Partners research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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.

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