On Monday, Deutsche Bank (ETR:DBKGn) reiterated its Buy rating on Select Medical (NYSE:SEM) Holdings Corporation (NYSE:SEM), maintaining a steady price target of $40.00.
The firm's analysis indicates that the market currently undervalues Select Medical, effectively attributing no value to Select RemainCo and pricing the stock close to the fair valuation for Concentra SpinCo, based on a low-to-mid case scenario.
"We continue to see material upside potential to SEM stock with our revised sum-of-the parts implying +44-144% upside or +50% versus our TP of $40 versus Friday's close (Feb 9)," said the analysts.
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. This revision is due to the anticipated expiration of the interest rate cap on September 30, 2024. However, the firm has not altered its revenue or EBITDA estimates for the company.
The analysis provided by Deutsche Bank includes a detailed pro forma for Select RemainCo, which encompasses the company's Critical Illness Hospitals (LTACH), Inpatient Rehab (IRF), and Outpatient Rehab (PT) assets, as well as for Concentra SpinCo. This pro forma outlines the key assumptions and expands the comparison set for Concentra, offering a comprehensive view of the company's financial prospects.
InvestingPro Insights
Select Medical Holdings Corporation (NYSE:SEM) is currently trading at a P/E ratio of 15.03, which is considered low relative to the company's near-term earnings growth. This aligns with Deutsche Bank's perspective that the stock is undervalued. An InvestingPro Tip suggests that the company's stock has a strong return over the last three months, with a 21.19% price total return, indicating a positive trend that could capture investor interest.
Additionally, analysts on InvestingPro predict that Select Medical will be profitable this year, which supports the bank's optimistic outlook for the company. The InvestingPro Data further reveals that Select Medical has a robust revenue growth of 4.35% over the last twelve months as of Q3 2023, with a gross profit margin of 19.32%, underlining the company's ability to generate income efficiently.
Investors looking for more insights can find additional InvestingPro Tips for Select Medical, which could provide a deeper understanding of the stock's potential. To access these tips, visit https://www.investing.com/pro/SEM. For those interested in a yearly or biyearly Pro and Pro+ subscription, use the coupon code PRONEWS24 to get an additional 10% off, and discover the full range of benefits that come with InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.