Healthcare has been a hot sector in 2011. Select Medical Holdings Corporation (SEM) has seen its shares jump 19% in 2011. But even with the stock surge, this Zacks #1 Rank (strong buy) is trading at just 11.4x forward estimates.
Select Medical Holdings operates 110 long term acute care hospitals and 8 acute medical rehabilitation hospitals in 28 states and 945 outpatient rehabilitation clinics in 35 states and D.C.
The company also provides medical rehabilitation services under contracts at nursing homes, hospitals, assisted living and senior care centers.
Select Surprised By 22% in the First Quarter
On May 5, Select reported its first quarter results and beat the Zacks Consensus by 4 cents per share. It was the first beat in the last 4 quarters.
Earnings per share were 22 cents compared to the consensus of 18 cents. Select made just 15 cents in the same quarter a year ago.
Revenue rose 18.5% to $693.2 million from $584.8 million in the first quarter of 2010. For the hospitals, revenue rose 26.3% to $519.9 million from $411.7 million. $90.1 million of the increase, however, was attributed to the acquisition of Regency.
Revenue for outpatient rehabilitation rose slightly to $173.2 million from $173.1 million a year ago.
Reaffirmed Full Year Guidance
The company reaffirmed its full year revenue guidance in the range of $2.65 billion to $2.75 billion.
Earnings are expected between 67 and 72 cents per share.
Zacks Consensus Estimates Rise
Given the beat, it’s not surprising that the Zacks Consensus Estimate for 2011 rose although analysts are much more optimistic than the company.
The 2011 Zacks Consensus jumped 7 cents to 77 cents, well above the 72 cents which is the high end of the guidance range.
That is earnings growth of 60% as Select made only 48 cents per share in 2010.
For 2012, earnings growth is expected to jump another 11.5% to 86 cents per share.
Lots of Value
In addition to a P/E under 15, which indicates “value”, Select also has a price-to-book ratio of 1.7. That is well under the 3.0 level used for value.
Another measure of value, the price-to-sales ratio, also indicates value as the ratio is at just 0.5. A ratio under 1.0 usually indicates a company is undervalued.
How hot has the healthcare sector been? It currently has a Zacks Industry Rank of 10 out of 265.
Shares have been on a roller coaster since the company went public a few years ago however.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.
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