Deutsche Bank Maintains Buy Rating on Select Medical Holdings Corporation
In a recent statement, Deutsche Bank reiterated its Buy rating on Select Medical Holdings Corporation while maintaining a steady price target of $40.00. The analysis conducted by the firm reveals that the market is currently undervaluing Select Medical, with no value attributed to Select RemainCo and the stock priced close to the fair valuation for Concentra SpinCo based on a low-to-mid case scenario.
The analysts at Deutsche Bank see significant upside potential in SEM stock, with their revised sum-of-the-parts implying a remarkable 44-144% upside or 50% versus their target price of $40. This projection indicates a positive outlook for the stock.
Although Deutsche Bank has adjusted its earnings per share (EPS) estimates for Select Medical for the years 2024 and 2025, decreasing them by 6% and 12% respectively, the firm has not altered its revenue or EBITDA estimates for the company. The revision in EPS estimates is a result of the anticipated expiration of the interest rate cap on September 30, 2024.
Deutsche Bank’s analysis includes a detailed pro forma for Select RemainCo, encompassing the company’s Critical Illness Hospitals (LTACH), Inpatient Rehab (IRF), and Outpatient Rehab (PT) assets, as well as for Concentra SpinCo. This pro forma provides key assumptions and expands the comparison set for Concentra, offering a comprehensive view of the company’s financial prospects.
Currently trading at a low P/E ratio of 15.03, Select Medical Holdings Corporation is considered undervalued relative to its near-term earnings growth. This aligns with Deutsche Bank’s perspective on the stock. Moreover, the company has shown a strong return over the last three months, with a 21.19% price total return, suggesting a positive trend that could attract investors.
Analysts predict that Select Medical will be profitable this year, further supporting Deutsche Bank’s positive outlook for the company. The data also reveals that Select Medical has experienced robust revenue growth of 4.35% over the last twelve months as of Q3 2023, with a gross profit margin of 19.32%. These figures highlight the company’s ability to generate income efficiently.
Overall, Deutsche Bank’s reaffirmation of its Buy rating on Select Medical Holdings Corporation and its optimistic outlook for the company indicate potential for significant upside in the stock, making it a compelling investment opportunity.
Analyst comment
Positive news.
As an analyst, I expect the market for Select Medical Holdings Corporation to see significant upside potential with a projected 44-144% increase in stock value. The reaffirmation of the Buy rating by Deutsche Bank and the company’s positive financial outlook make it an attractive investment opportunity.
