What Does Select Medical Holdings Corporation's (NYSE:SEM) Share Price Indicate?

While Select Medical Holdings Corporation (NYSE:SEM) might not have the largest market cap around , it led the NYSE gainers with a relatively large price hike in the past couple of weeks. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine Select Medical Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Select Medical Holdings

What's The Opportunity In Select Medical Holdings?

Good news, investors! Select Medical Holdings is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 17.54x is currently well-below the industry average of 24.62x, meaning that it is trading at a cheaper price relative to its peers. However, given that Select Medical Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

Can we expect growth from Select Medical Holdings?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by a double-digit 16% over the next couple of years, the outlook is positive for Select Medical Holdings. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? Since SEM is currently trading below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive profit outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on SEM for a while, now might be the time to make a leap. Its buoyant future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SEM. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Select Medical Holdings.

If you are no longer interested in Select Medical Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com