Amidst a daily loss of -8.28% and a modest 3-month gain of 4.17%, Surgery Partners Inc (SGRY, Financial) faces the critical question of valuation with a reported Loss Per Share of $0.32. Investors are keen to determine whether the stock is modestly overvalued as suggested by its current market dynamics. The following analysis delves into the intrinsic value of Surgery Partners, offering investors a detailed perspective on its valuation.
Company Introduction
Surgery Partners Inc (SGRY, Financial), a key player in the U.S. healthcare sector, operates surgical facilities across approximately 30 states. With a focus on ambulatory surgery centers, the company partners with physician groups and healthcare systems to provide a range of services, including clinical lab operations, urgent care facilities, and physician practices. The firm's revenue is primarily driven by its Surgical Facility Services segment. Currently, the stock price stands at $32.45, which is above the GF Value of $27.37, indicating a potential overvaluation. This sets the stage for an in-depth evaluation of the company's fair value, juxtaposing financial metrics with the company's operational footprint.
Summarize GF Value
The GF Value is an exclusive metric that pinpoints the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor for past performance and growth, and future business performance projections. This value serves as a benchmark for fair trading. Surgery Partners (SGRY, Financial) appears modestly overvalued when assessed against this measure. The current share price surpasses the GF Value Line, suggesting that the stock's future returns may potentially be lower than its business growth trajectory. This valuation insight is crucial for investors considering long-term investments in Surgery Partners.
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Financial Strength
Assessing a company's financial strength is vital before investing. Surgery Partners' financial strength is less than ideal, with a cash-to-debt ratio of 0.08, placing it lower than 84.25% of its peers in the Healthcare Providers & Services industry. The company's overall financial strength score is 4 out of 10, highlighting the need for cautious evaluation by investors.
Profitability and Growth
Profitability is a less risky investment criterion, and Surgery Partners has been profitable 2 years over the past decade. With a revenue of $2.70 billion and a Loss Per Share of $0.32, its operating margin stands at a commendable 14.34%. However, the company's profitability rank is only 4 out of 10. In terms of growth, Surgery Partners' 3-year average revenue growth rate lags behind most of its industry counterparts, and its EBITDA growth rate is in the lower quartile, signaling potential concerns for value investors.
ROIC vs WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is another profitability indicator. Surgery Partners' ROIC of 6.18 is significantly lower than its WACC of 13.14, implying that the company may not be creating adequate value for its shareholders. This discrepancy is a red flag for investors looking for companies that consistently generate higher returns than their capital costs.
Conclusion
Conclusively, the stock of Surgery Partners (SGRY, Financial) appears modestly overvalued. The combination of the company's weak financial condition, subpar profitability, and slow growth relative to the industry paints a cautious picture for potential investors. For those interested in a deeper financial exploration of Surgery Partners, the 30-Year Financials provide an extensive overview.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
