Is Now An Opportune Moment To Examine U.S. Physical Therapy, Inc. (NYSE:USPH)?

U.S. Physical Therapy, Inc. (NYSE:USPH), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$121 and falling to the lows of US$104. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether U.S. Physical Therapy's current trading price of US$112 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at U.S. Physical Therapy’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for U.S. Physical Therapy

Is U.S. Physical Therapy still cheap?

U.S. Physical Therapy is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’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 45.02x is currently well-above the industry average of 20.88x, meaning that it is trading at a more expensive price relative to its peers. But, is there another opportunity to buy low in the future? Since U.S. Physical Therapy’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What does the future of U.S. Physical Therapy look like?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. U.S. Physical Therapy's earnings over the next few years are expected to increase by 24%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? USPH’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe USPH should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on USPH for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for USPH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing U.S. Physical Therapy at this point in time. For example - U.S. Physical Therapy has 2 warning signs we think you should be aware of.

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This article by Simply Wall St is general in nature. 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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