SEM Stock Overview
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.
Select Medical Holdings Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$22.76|
|52 Week High||US$37.08|
|52 Week Low||US$21.40|
|1 Month Change||-14.40%|
|3 Month Change||-3.64%|
|1 Year Change||-38.03%|
|3 Year Change||41.54%|
|5 Year Change||20.42%|
|Change since IPO||125.57%|
Recent News & Updates
Returns At Select Medical Holdings (NYSE:SEM) Appear To Be Weighed Down
There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two...
Select Medical: Adding To Position For Further Upside Capture
Summary Select Medical came in with a strong earnings clip in Q2 FY22 having secured a solid set of numbers for the period. The company continues to generate sufficient return on its investments and this is carried through to quarterly and annual earnings. Shares are attractively priced at a c.60% discount to peers across key multiples used in this analysis. Here I note the buy thesis for SEM remains. We are seeking an initial price objective of $31. Investment Summary The buy thesis on Select Medical Holdings Corporation (NYSE:SEM) remains well in tact following its Q2 FY22 numbers. I've covered the stock at length previously [here], and noted several tailwinds related to its earnings and investment trends over the years to date. With the continuation of these trends from Q2 FY22 the company looks well positioned to continue delivering bottom-line growth and generating sufficient return on its invested capital looking ahead. We continue to add to the SEM position at these ranges [in small parcels to better manage sizing], seeking an initial return objective up to $31 on a buy recommendation. Earnings trends continue in latest numbers SEM clipped a strong set of quarterly numbers for the three months ending June 30 2022. Revenue of $1.58 million ("mm'') came in ~130bps higher on the year although was tied to a 775bps increase in cost of services to c.$1.4mm. Total costs for the year jumped ~720bps, however, this was comprised of a $51mm non-cash depreciation and amortization charge for the quarter [+10bps YoY]. Digging a little further into the operating metrics illustrates pleasing results by my estimation. Agency rates have narrowed 22% sequentially from Q1 FY22-Q2 FY22, clipping an average agency rate ("AAR") of $111/hr for the quarter [from $143/hr]. By June and July, the AAR had dropped to $95/hr and $90/hr respectively. Whereas utilization also compressed from 37.5% last quarter to reach 24.1% by June, the overall agency expense decreased ~37% YoY to $56.4mm from the period of Q1-Q2, and had fallen to $12.8mm by June. One key factor to the SEM investment debate remains around its sensitivity to policy rates and what it's doing to hedge this duration risk. I'd talked about this at length in our previous analysis of SEM, and noted the company's interest expense had been declining since FY19. Interest expense did creep up during the quarter, however, and totaled $41.1mm from $33.9mm from the previous three months. With respect to its hedging activities on this, I made the following comments previously, supported by Exhibit 1: "The interest expense on its term loan debt looks to potentially creep lower in coming periods as well. This is due to SEM's collar on a floating rate, that's indexed to 1-month LIBOR/SOFRA. The interest rate collar caps floating rate exposure on a notional $2 billion of term liabilities at 1%. When the cap of 1% is breached on the term debt the counterparty in the contract is liable for payment. SEM has this hedge in place until September FY24, and the position now rests at ~$70 million in the money. Effectively we see SEM's sensitivity to rates reducing substantially from this move. Interest expenses have been reducing since 2019 whilst cash interest payments are following suit. As central banks embark on the tightening cycle, this adds weight to our 'quality' thesis for SEM's balance sheet, despite its debt load." Providing an update on the company's liability structure, CEO Martin Jackson was quite transparent on the Q2 earnings call: "At the end of the quarter, we had $3.8 billion of debt outstanding and $94.7mm of cash on the balance sheet. Our debt balance at the end of the quarter included $2.1 billion in term loans, $350mm in revolving loans, $1.2 billion in 6.25% senior notes and $88.4mm of other miscellaneous debt. We ended the quarter with net leverage for our senior secured credit agreement of 5.44 times." This point is a key factor in the debate moving forward [$3.8 Billion is no small obligation] and may impact FY22-FY24 pre and post-tax earnings by estimation. Exhibit 1. SEM interest rate sensitivity: Q4 FY14-Q1 FY22, semiannual. Interest expense has since curled up to $41mm in Q2 from $33mm in Q1. This remains central to the company's ability to invest capital, generate return on its investments and carry this through to earnings. Outstanding debt is now $3.8 Billion comprised of a mix of term loans, revolvers, and is inclusive of a $1.2 Billion in senior notes paying 6.25% YTM. Net leverage on secured credit at ~5.4x. Note: SEM Q2 FY22 cash interest and interest expense not shown. Data taken from previous HB Insights analysis on SEM from June FY22. (Data: HB Insights - SEM [June 2022]; SEM SEC Filings) In addition, and as seen in Exhibit 2, quarterly free cash flow ("FCF") trends have been noteworthy takeout from the company's earnings from at least FY18-date. Exhibit 2 is a busy chart, synthesizing a wide array of data into a single image. Key features to note, however, are the company's narrowing FCF yield [blue line], that now sits in-line with FY16 levels. However, whilst the realized TTM FCF yield has tightened, the absolute conversion of FCF has been a key feature of the SEM investment debate. FCF is the lifeblood of any corporation, and therefore I'm satisfied with the company's level of free cash conversion from operating income, as seen below. It realized $125mm in FCF in Q2. Meanwhile, the ratio of CFFO to net income remains at a healthy ~2.6x, indicating there's a high degree of cash backing the company's valuation [from an earnings perspective]. Exhibit 2. Quarterly FCF trends have been a standout for SEM Note: All figures in $mm or [%], calculated from GAAP earnings with no reconcilations. Free cash flow calculated as [NOPAT - investments] with free cash flow net of dividends as [(NOPAT - Investments) - dividends]. Free cash flow yield calculated as a function of enterprise value. Cash flow from operations to net income calculated as [CFFO/NI] on quarterly basis. (Data: HB Insights; SEM SEC Filings)
Calculating The Fair Value Of Select Medical Holdings Corporation (NYSE:SEM)
In this article we are going to estimate the intrinsic value of Select Medical Holdings Corporation ( NYSE:SEM ) by...
|SEM||US Healthcare||US Market|
Return vs Industry: SEM underperformed the US Healthcare industry which returned 6.3% over the past year.
Return vs Market: SEM underperformed the US Market which returned -22.1% over the past year.
|SEM Average Weekly Movement||6.3%|
|Healthcare Industry Average Movement||8.1%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.8%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: SEM is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.
Volatility Over Time: SEM's weekly volatility (6%) has been stable over the past year.
About the Company
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.
Select Medical Holdings Fundamentals Summary
|SEM fundamental statistics|
Is SEM overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|SEM income statement (TTM)|
|Cost of Revenue||US$5.14b|
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
|Earnings per share (EPS)||1.77|
|Net Profit Margin||3.56%|
How did SEM perform over the long term?See historical performance and comparison
2.2%Current Dividend Yield
Is SEM undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score 4/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Key Valuation Metric
Which metric is best to use when looking at relative valuation for SEM?
Other financial metrics that can be useful for relative valuation.
|What is SEM's n/a Ratio?|
Price to Earnings Ratio vs Peers
How does SEM's PE Ratio compare to its peers?
|SEM PE Ratio vs Peers|
|Company||PE||Estimated Growth||Market Cap|
EHC Encompass Health
ENSG Ensign Group
THC Tenet Healthcare
UHS Universal Health Services
SEM Select Medical Holdings
Price-To-Earnings vs Peers: SEM is good value based on its Price-To-Earnings Ratio (12.8x) compared to the peer average (12.9x).
Price to Earnings Ratio vs Industry
How does SEM's PE Ratio compare vs other companies in the US Healthcare Industry?
Price-To-Earnings vs Industry: SEM is good value based on its Price-To-Earnings Ratio (12.8x) compared to the US Healthcare industry average (18.4x)
Price to Earnings Ratio vs Fair Ratio
What is SEM's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
|Current PE Ratio||12.8x|
|Fair PE Ratio||39.2x|
Price-To-Earnings vs Fair Ratio: SEM is good value based on its Price-To-Earnings Ratio (12.8x) compared to the estimated Fair Price-To-Earnings Ratio (39.2x).
Share Price vs Fair Value
What is the Fair Price of SEM when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: SEM ($22.76) is trading below our estimate of fair value ($26.15)
Significantly Below Fair Value: SEM is trading below fair value, but not by a significant amount.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price, but analysts are not within a statistically confident range of agreement.
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How is Select Medical Holdings forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?
Future Growth Score4/6
Future Growth Score 4/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: SEM's forecast earnings growth (26.8% per year) is above the savings rate (1.9%).
Earnings vs Market: SEM's earnings (26.8% per year) are forecast to grow faster than the US market (14.8% per year).
High Growth Earnings: SEM's earnings are expected to grow significantly over the next 3 years.
Revenue vs Market: SEM's revenue (4.7% per year) is forecast to grow slower than the US market (7.6% per year).
High Growth Revenue: SEM's revenue (4.7% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: SEM's Return on Equity is forecast to be high in 3 years time (26.2%)
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How has Select Medical Holdings performed over the past 5 years?
Past Performance Score2/6
Past Performance Score 2/6
Growing Profit Margin
Earnings vs Industry
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: SEM has high quality earnings.
Growing Profit Margin: SEM's current net profit margins (3.6%) are lower than last year (6.9%).
Past Earnings Growth Analysis
Earnings Trend: SEM's earnings have grown significantly by 23% per year over the past 5 years.
Accelerating Growth: SEM's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.
Earnings vs Industry: SEM had negative earnings growth (-46.2%) over the past year, making it difficult to compare to the Healthcare industry average (3.2%).
Return on Equity
High ROE: Whilst SEM's Return on Equity (21.45%) is high, this metric is skewed due to their high level of debt.
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How is Select Medical Holdings's financial position?
Financial Health Score0/6
Financial Health Score 0/6
Short Term Liabilities
Long Term Liabilities
Financial Position Analysis
Short Term Liabilities: SEM's short term assets ($1.2B) do not cover its short term liabilities ($1.2B).
Long Term Liabilities: SEM's short term assets ($1.2B) do not cover its long term liabilities ($5.0B).
Debt to Equity History and Analysis
Debt Level: SEM's net debt to equity ratio (271%) is considered high.
Reducing Debt: SEM's debt to equity ratio has increased from 197.8% to 281% over the past 5 years.
Debt Coverage: SEM's debt is not well covered by operating cash flow (5.7%).
Interest Coverage: SEM's interest payments on its debt are not well covered by EBIT (3x coverage).
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What is Select Medical Holdings's current dividend yield, its reliability and sustainability?
Dividend Score 2/6
Cash Flow Coverage
Current Dividend Yield
Dividend Yield vs Market
|Select Medical Holdings Dividend Yield vs Market|
|Company (Select Medical Holdings)||2.2%|
|Market Bottom 25% (US)||1.6%|
|Market Top 25% (US)||4.6%|
|Industry Average (Healthcare)||1.4%|
|Analyst forecast in 3 Years (Select Medical Holdings)||1.1%|
Notable Dividend: SEM's dividend (2.2%) is higher than the bottom 25% of dividend payers in the US market (1.67%).
High Dividend: SEM's dividend (2.2%) is low compared to the top 25% of dividend payers in the US market (4.69%).
Stability and Growth of Payments
Stable Dividend: SEM has been paying a dividend for less than 10 years and during this time payments have been volatile.
Growing Dividend: SEM's dividend payments have increased, but the company has only paid a dividend for 9 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonably low payout ratio (28.8%), SEM's dividend payments are well covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its high cash payout ratio (332.3%), SEM's dividend payments are not well covered by cash flows.
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How experienced are the management team and are they aligned to shareholders interests?
Average management tenure
David Chernow (65 yo)
Mr. David S. Chernow has been the Chief Executive Officer at Select Medical Holdings Corporation and Select Medical Corporation since January 1, 2014. Mr. Chernow serves as Chairman of the Board at OneOnco...
CEO Compensation Analysis
|David Chernow's Compensation vs Select Medical Holdings Earnings|
|Date||Total Comp.||Salary||Company Earnings|
|Jun 30 2022||n/a||n/a|
|Mar 31 2022||n/a||n/a|
|Dec 31 2021||US$12m||US$995k|
|Sep 30 2021||n/a||n/a|
|Jun 30 2021||n/a||n/a|
|Mar 31 2021||n/a||n/a|
|Dec 31 2020||US$8m||US$995k|
|Sep 30 2020||n/a||n/a|
|Jun 30 2020||n/a||n/a|
|Mar 31 2020||n/a||n/a|
|Dec 31 2019||US$8m||US$995k|
|Sep 30 2019||n/a||n/a|
|Jun 30 2019||n/a||n/a|
|Mar 31 2019||n/a||n/a|
|Dec 31 2018||US$8m||US$995k|
|Sep 30 2018||n/a||n/a|
|Jun 30 2018||n/a||n/a|
|Mar 31 2018||n/a||n/a|
|Dec 31 2017||US$7m||US$984k|
|Sep 30 2017||n/a||n/a|
|Jun 30 2017||n/a||n/a|
|Mar 31 2017||n/a||n/a|
|Dec 31 2016||US$6m||US$938k|
|Sep 30 2016||n/a||n/a|
|Jun 30 2016||n/a||n/a|
|Mar 31 2016||n/a||n/a|
|Dec 31 2015||US$6m||US$839k|
Compensation vs Market: David's total compensation ($USD11.69M) is above average for companies of similar size in the US market ($USD6.87M).
Compensation vs Earnings: David's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.
Experienced Management: SEM's management team is seasoned and experienced (22.5 years average tenure).
Experienced Board: SEM's board of directors are seasoned and experienced ( 13.8 years average tenure).
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.
|Owner Type||Number of Shares||Ownership Percentage|
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
|Ownership||Name||Shares||Current Value||Change %||Portfolio %|
Select Medical Holdings Corporation's employee growth, exchange listings and data sources
- Name: Select Medical Holdings Corporation
- Ticker: SEM
- Exchange: NYSE
- Founded: 1996
- Industry: Health Care Facilities
- Sector: Healthcare
- Implied Market Cap: US$2.866b
- Shares outstanding: 125.92m
- Website: https://www.selectmedical.com
Number of Employees
- Select Medical Holdings Corporation
- 4714 Gettysburg Road
- PO Box 2034
- United States
|Ticker||Exchange||Primary Security||Security Type||Country||Currency||Listed on|
|SEM||NYSE (New York Stock Exchange)||Yes||Common Stock||US||USD||Sep 2009|
|S24||DB (Deutsche Boerse AG)||Yes||Common Stock||DE||EUR||Sep 2009|
Company Analysis and Financial Data Status
|Data||Last Updated (UTC time)|
|Company Analysis||2022/09/28 00:00|
|End of Day Share Price||2022/09/28 00:00|
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.