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Investing.com - Benchmark maintained its buy rating and $21.00 price target on Select Medical (TASE:BLWV) Holdings (NYSE:SEM) on Monday. The healthcare company, currently trading near its 52-week low at $14.84, has caught analysts’ attention with its strong free cash flow yield, according to InvestingPro data.
The research firm highlighted several emerging growth and margin drivers for the healthcare company following investor calls with Select Medical’s CFO Mike Malatesta and Treasurer Joel Veit. With annual revenue of $5.22 billion and EBITDA of $386.2 million, Select Medical has demonstrated solid operational performance.
Benchmark identified three key factors supporting its positive outlook: the continued accretive impact of the company’s Inpatient Rehab segment, which is growing at a double-digit pace and represents Select Medical’s most profitable business unit; a positive 2% Medicare rate update for Outpatient Rehab in 2026 compared to a 3.2% decline this year; and expected diminishing margin headwinds for LTAC hospitals beginning in 2026.
The firm noted that management’s fiscal year 2025 guidance, which was lowered 2% due to factors in the first quarter, still implies AEBITDA midpoint growth of 7% for the second through fourth quarters.
Benchmark’s revised fiscal year 2026 model projects 10% growth for Select Medical, with the firm suggesting the stock appears undervalued as it trades at nearly a four-turn discount to its peer group median. This assessment aligns with InvestingPro’s Fair Value analysis, which suggests potential upside from current levels. Discover more insights and detailed valuation metrics in the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Select Medical Holdings Corporation reported its first-quarter earnings for 2025, which revealed a mixed performance. The company exceeded analysts’ expectations with an earnings per share (EPS) of $0.75, significantly higher than the forecasted $0.37. However, revenue fell short, coming in at $1.35 billion against a forecast of $1.39 billion. UBS, Benchmark, and Mizuho (NYSE:MFG) Securities have all adjusted their price targets for Select Medical, citing regulatory challenges and first-quarter performance issues. UBS lowered its target to $15.00, maintaining a Neutral rating, while Benchmark and Mizuho adjusted their targets to $21.00, with Benchmark maintaining a Buy rating and Mizuho an Outperform rating. Analysts have noted that the company’s Long-Term Acute Care Hospital (LTACH) segment faced significant challenges due to regulatory changes, affecting their financial outlook. Despite these challenges, there is optimism about the company’s Rehabilitation Hospitals segment, which showed a 16% revenue increase. Select Medical is actively engaging with regulatory bodies to address the impact of these changes and remains focused on strategic growth.
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