company background image
SEM

Select Medical Holdings NYSE:SEM Stock Report

Last Price

US$22.76

Market Cap

US$2.9b

7D

-8.6%

1Y

-38.0%

Updated

28 Sep, 2022

Data

Company Financials +
SEM fundamental analysis
Snowflake Score
Valuation4/6
Future Growth4/6
Past Performance2/6
Financial Health0/6
Dividends2/6

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

Summary of all time highs, changes and price drops for Select Medical Holdings
Historical stock prices
Current Share PriceUS$22.76
52 Week HighUS$37.08
52 Week LowUS$21.40
Beta1.35
1 Month Change-14.40%
3 Month Change-3.64%
1 Year Change-38.03%
3 Year Change41.54%
5 Year Change20.42%
Change since IPO125.57%

Recent News & Updates

Sep 16
Returns At Select Medical Holdings (NYSE:SEM) Appear To Be Weighed Down

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...

Sep 14

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)

Aug 31
Calculating The Fair Value Of Select Medical Holdings Corporation (NYSE:SEM)

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...

Shareholder Returns

SEMUS HealthcareUS Market
7D-8.6%-0.6%-2.0%
1Y-38.0%7.9%-20.3%

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.

Price Volatility

Is SEM's price volatile compared to industry and market?
SEM volatility
SEM Average Weekly Movement6.3%
Healthcare Industry Average Movement8.1%
Market Average Movement6.9%
10% most volatile stocks in US Market15.8%
10% least volatile stocks in US Market2.8%

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

FoundedEmployeesCEOWebsite
199643,200David Chernowhttps://www.selectmedical.com

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

How do Select Medical Holdings's earnings and revenue compare to its market cap?
SEM fundamental statistics
Market CapUS$2.87b
Earnings (TTM)US$223.37m
Revenue (TTM)US$6.28b

12.8x

P/E Ratio

0.5x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
SEM income statement (TTM)
RevenueUS$6.28b
Cost of RevenueUS$5.14b
Gross ProfitUS$1.13b
Other ExpensesUS$910.44m
EarningsUS$223.37m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)1.77
Gross Margin18.06%
Net Profit Margin3.56%
Debt/Equity Ratio281.0%

How did SEM perform over the long term?

See historical performance and comparison

Dividends

2.2%

Current Dividend Yield

29%

Payout Ratio
We’ve recently updated our valuation analysis.

Valuation

Is SEM undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

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

  • Analyst Forecast

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.

SEM key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue1.3x
Enterprise Value/EBITDA12.7x
PEG Ratio0.5x

Price to Earnings Ratio vs Peers

How does SEM's PE Ratio compare to its peers?

SEM PE Ratio vs Peers
The above table shows the PE ratio for SEM vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average12.9x
EHC Encompass Health
14.6x9.7%US$4.8b
ENSG Ensign Group
21.8x12.4%US$4.4b
THC Tenet Healthcare
6.5x18.4%US$5.7b
UHS Universal Health Services
8.6x4.3%US$6.6b
SEM Select Medical Holdings
12.8x26.8%US$2.9b

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.

SEM PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio12.8x
Fair PE Ratio39.2x

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.


Discover undervalued companies

Future Growth

How is Select Medical Holdings forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

Future Growth Score

4/6

Future Growth Score 4/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


26.8%

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%)


Discover growth companies

Past Performance

How has Select Medical Holdings performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


23.0%

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.


Discover strong past performing companies

Financial Health

How is Select Medical Holdings's financial position?

Financial Health Score

0/6

Financial Health Score 0/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

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).


Balance Sheet


Discover healthy companies

Dividend

What is Select Medical Holdings's current dividend yield, its reliability and sustainability?

Dividend Score

2/6

Dividend Score 2/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


2.20%

Current Dividend Yield

Dividend Yield vs Market

Select Medical Holdings Dividend Yield vs Market
How does Select Medical Holdings dividend yield compare to the market?
SegmentDividend Yield
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.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

22.5yrs

Average management tenure


CEO

David Chernow (65 yo)

12yrs

Tenure

US$11,687,600

Compensation

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
How has David Chernow's remuneration changed compared to Select Medical Holdings's earnings?
DateTotal Comp.SalaryCompany Earnings
Jun 30 2022n/an/a

US$223m

Mar 31 2022n/an/a

US$329m

Dec 31 2021US$12mUS$995k

US$389m

Sep 30 2021n/an/a

US$415m

Jun 30 2021n/an/a

US$415m

Mar 31 2021n/an/a

US$306m

Dec 31 2020US$8mUS$995k

US$250m

Sep 30 2020n/an/a

US$206m

Jun 30 2020n/an/a

US$162m

Mar 31 2020n/an/a

US$155m

Dec 31 2019US$8mUS$995k

US$143m

Sep 30 2019n/an/a

US$136m

Jun 30 2019n/an/a

US$138m

Mar 31 2019n/an/a

US$140m

Dec 31 2018US$8mUS$995k

US$133m

Sep 30 2018n/an/a

US$207m

Jun 30 2018n/an/a

US$193m

Mar 31 2018n/an/a

US$189m

Dec 31 2017US$7mUS$984k

US$171m

Sep 30 2017n/an/a

US$93m

Jun 30 2017n/an/a

US$82m

Mar 31 2017n/an/a

US$74m

Dec 31 2016US$6mUS$938k

US$112m

Sep 30 2016n/an/a

US$121m

Jun 30 2016n/an/a

US$143m

Mar 31 2016n/an/a

US$146m

Dec 31 2015US$6mUS$839k

US$127m

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.


Leadership Team

Experienced Management: SEM's management team is seasoned and experienced (22.5 years average tenure).


Board Members

Experienced Board: SEM's board of directors are seasoned and experienced ( 13.8 years average tenure).


Ownership

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.


Ownership Breakdown

What is the ownership structure of SEM?
Owner TypeNumber of SharesOwnership Percentage
Private Companies30,6010.02%
Individual Insiders24,300,89919.2%
Institutions102,039,33180.7%

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Top 25 shareholders own 86.48% of the company
OwnershipNameSharesCurrent ValueChange %Portfolio %
18.28%
T. Rowe Price Group, Inc.
23,011,826$523.7m1.75%0.06%
13.82%
BlackRock, Inc.
17,400,969$396.0m-6.32%0.01%
9.58%
The Vanguard Group, Inc.
12,064,094$274.6m-6.19%0.01%
7.47%
Robert Ortenzio
9,409,913$214.2m12.94%no data
7.26%
Rocco Ortenzio
9,142,079$208.1m-12.41%no data
4.47%
LSV Asset Management
5,629,349$128.1m4.25%0.27%
3.66%
Dimensional Fund Advisors LP
4,614,614$105.0m0.29%0.03%
3.2%
State Street Global Advisors, Inc.
4,029,860$91.7m-1.22%0.01%
3.18%
Camber Capital Management LP
4,000,000$91.0m300%4.05%
1.77%
Macquarie Investment Management Business Trust
2,224,737$50.6m0.88%0.06%
1.6%
Principal Global Investors, LLC
2,015,216$45.9m2.37%0.03%
1.42%
Geode Capital Management, LLC
1,790,671$40.8m-1.97%0.01%
1.26%
Victory Capital Management Inc.
1,584,402$36.1m19.76%0.04%
1.13%
BNY Mellon Asset Management
1,427,156$32.5m-1.6%0.01%
0.97%
Northern Trust Global Investments
1,219,920$27.8m-3.19%0.01%
0.95%
Charles Schwab Investment Management, Inc.
1,201,534$27.3m5.88%0.01%
0.94%
Martin Jackson
1,183,424$26.9m7.61%no data
0.93%
Norges Bank Investment Management
1,167,804$26.6m0%no data
0.9%
Fuller & Thaler Asset Management, Inc.
1,135,486$25.8m-37.11%0.19%
0.85%
Russell Carson
1,076,000$24.5m0.94%no data
0.78%
David Chernow
979,100$22.3m16.62%no data
0.56%
Teachers Insurance and Annuity Association-College Retirement Equities Fund
701,179$16.0m-47.47%0.01%
0.51%
Invesco Capital Management LLC
641,222$14.6m-25.24%0.01%
0.5%
Argenta Bank Luxembourg SA
632,518$14.4m68.75%0.43%
0.48%
Morgan Stanley, Investment Banking and Brokerage Investments
605,726$13.8m-23.82%no data

Company Information

Select Medical Holdings Corporation's employee growth, exchange listings and data sources


Key Information

  • 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


Location

  • Select Medical Holdings Corporation
  • 4714 Gettysburg Road
  • PO Box 2034
  • Mechanicsburg
  • Pennsylvania
  • 17055
  • United States


Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
SEMNYSE (New York Stock Exchange)YesCommon StockUSUSDSep 2009
S24DB (Deutsche Boerse AG)YesCommon StockDEEURSep 2009

Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/09/28 00:00
End of Day Share Price2022/09/28 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


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.