Select Medical Holdings Corporation ( SEM Quick Quote SEM - Free Report) looks poised for long-term growth on the back of its leadership position and cost-effective healthcare services in each of its business segments. Its acquisition strategy also aids its organic growth. Further, a geographically-diversified portfolio of facilities in the United States allows the company to bank on multiple potential acquisition opportunities.
The company experienced volume declines across Critical Illness Recovery Hospital, Rehabilitation Hospital, Outpatient Rehabilitation and Concentra segments in mid-March when all state governments began placing significant restrictions. This caused a significant contraction in patient volumes. However since May, the governments began to ease restrictions, which gradually led to an uptick in patients admissions, thereby boosting volume recovery.
Notably, in the recently reported quarter, the company’s revenues increased 12.2% and 8.5% in the Critical Illness Recovery Hospital Segment and Rehabilitation Hospital Segment, respectively.
Its lower operating expenses are an added positive. This upside was achieved on the back of an improved operating performance by its critical illness recovery hospital and rehabilitation hospital segments as well as cost-reductions made in its Concentra segment. Additionally, the company took specific temporary measures to curb its operating costs and expenses. These initiatives included trimming of labor costs through employee furloughs, salary and wage cuts for certain employees, and condensing the duty hours of part-time employees and limiting discretionary spending on capital expenditures.
The company also streamlined its business by selling an outpatient rehabilitation business, a rehabilitation hospital business and Concentra’s Department of Veterans Affairs community-based outpatient clinic business.
Its inorganic growth story is also impressive. Since the company’s inception in 1997 through 2018, it completed 10 significant acquisitions for $3.32 billion, the most notable deals being the buyouts of Physiotherapy, Concentra and U.S. Health Works. These purchases proved to be accretive to the company’s earnings.
The company is well-positioned to capitalize on the consolidation opportunities within each of its business segments, which operates in a highly-fragmented market and selectively augment the company’s internal growth.
In six months’ time, the stock has soared 58.26% compared with its
industry’s rally of 13.9%.
The stock carries a Zacks Rank #3 (Hold), currently. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
Some better-ranked stocks in the same space are
Molina Healthcare, Inc. ( MOH Quick Quote MOH - Free Report) , Acadia Healthcare Company, Inc. ( ACHC Quick Quote ACHC - Free Report) and PRA Health Sciences, Inc. ( PRAH Quick Quote PRAH - Free Report) , each carrying a Zacks Rank #2 (Buy) at present.
Earnings of PRA Health, Acadia Healthcare and Molina Healthcare beat estimates in the last reported quarter by 15.04%, 23.64% and 53.42%, respectively.
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