Select Medical Holdings Corporation Stock Downgraded (SEM)

NEW YORK ( TheStreet) -- Select Medical Holdings Corporation (NYSE: SEM) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally poor debt management and poor profit margins.

Highlights from the ratings report include:
  • SEM's revenue growth has slightly outpaced the industry average of 10.1%. Since the same quarter one year prior, revenues rose by 12.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SELECT MEDICAL HOLDINGS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, SELECT MEDICAL HOLDINGS CORP increased its bottom line by earning $0.72 versus $0.48 in the prior year. This year, the market expects an improvement in earnings ($0.90 versus $0.72).
  • In its most recent trading session, SEM has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Currently the debt-to-equity ratio of 1.72 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, SEM's quick ratio is somewhat strong at 1.11, demonstrating the ability to handle short-term liquidity needs.
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Select Medical Holdings Corporation, through its subsidiary, Select Medical Corporation, operates specialty hospitals and outpatient rehabilitation clinics in the United States. The company has a P/E ratio of 13.3, below the average health services industry P/E ratio of 13.6 and below the S&P 500 P/E ratio of 17.7. Select Medical has a market cap of $1.21 billion and is part of the health care sector and health services industry. Shares are down 9.3% year to date as of the close of trading on Monday.

You can view the full Select Medical Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff
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