Back to top

Image: Bigstock

Are Investors Undervaluing Select Medical (SEM) Right Now?

Read MoreHide Full Article

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Select Medical (SEM - Free Report) is a stock many investors are watching right now. SEM is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 11.16. This compares to its industry's average Forward P/E of 17.79. Over the last 12 months, SEM's Forward P/E has been as high as 20.93 and as low as 7.91, with a median of 13.81.

Investors will also notice that SEM has a PEG ratio of 0.74. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SEM's industry has an average PEG of 1.34 right now. Over the past 52 weeks, SEM's PEG has been as high as 1.50 and as low as 0.53, with a median of 0.99.

Investors should also recognize that SEM has a P/B ratio of 2.29. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. SEM's current P/B looks attractive when compared to its industry's average P/B of 3.75. Over the past year, SEM's P/B has been as high as 4.08 and as low as 1.62, with a median of 2.30.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. SEM has a P/S ratio of 0.42. This compares to its industry's average P/S of 0.47.

Finally, investors will want to recognize that SEM has a P/CF ratio of 5.68. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 14.76. SEM's P/CF has been as high as 10.12 and as low as 4.02, with a median of 5.87, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Select Medical is likely undervalued currently. And when considering the strength of its earnings outlook, SEM sticks out at as one of the market's strongest value stocks.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Select Medical Holdings Corporation (SEM) - free report >>

Published in