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1. Company Snapshot

1.a. Company Description

Healthcare Services Group, Inc.provides management, administrative, and operating services to the housekeeping, laundry, linen, facility maintenance, and dietary service departments of nursing homes, retirement complexes, rehabilitation centers, and hospitals in the United States.It operates through two segments, Housekeeping and Dietary.


The Housekeeping segment engages in the cleaning, disinfecting, and sanitizing of resident rooms and common areas of the client's facility, as well as laundering and processing of the bed linens, uniforms, resident personal clothing, and other assorted linen items utilized at a client's facility.The Dietary segment provides food purchasing, meal preparation, and professional dietitian services, which include the development of menus that meet the dietary needs of residents.This segment also offers on-site management and clinical consulting services to facilities.


As of December 31, 2021, the company provided its services to approximately 3,000 facilities.Healthcare Services Group, Inc.was incorporated in 1976 and is based in Bensalem, Pennsylvania.

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1.b. Last Insights on HCSG

Here is a 90-word analysis of the negative drivers behind Healthcare Services Group, Inc.'s recent performance: The company's Q4 earnings of $0.16 per share missed estimates, driven by lower-than-expected revenue and higher operating expenses. On the earnings call, management cited labor cost pressures and investments in technology and growth initiatives as key challenges. The lack of visibility into a turnaround in these areas weighs on the company's near-term outlook. Additionally, the company's failure to expand access to healthcare services and investments in medical tourism, a key trend in the Middle East & Africa pharmaceuticals market, may further hinder its growth prospects.

1.c. Company Highlights

2. HCSG Delivers Strong Q3 2025 Results with Revenue Growth and Margin Expansion

HCSG reported revenue of $464.3 million, an 8.5% increase over the prior year, driven by new client wins and high retention rates. Segment revenues for Environmental Services and Dietary Services were $211.8 million and $252.5 million, respectively. Net income and diluted earnings per share were $43 million and $0.59 per share, respectively, with the latter beating analyst estimates. Cost of services was reported at $367.9 million, or 79.2%, including a $34.2 million benefit from the ERC. SG&A was $50.5 million, or 10.1%, and is expected to be managed in the 9.5% to 10.5% range in the near term.

Publication Date: Nov -23

📋 Highlights
  • Revenue Growth:: Q3 revenue reached $464.3M, up 8.5% YoY, driven by new client wins and 90% retention rates.
  • Segment Margins:: Environmental Services margin at 10.7%, Dietary Services at 5.1%, reflecting operational efficiency.
  • Strong Cash Flow:: Generated $71.3M in operating cash flow, with $207.5M in cash and equivalents, and an undrawn credit facility.
  • Share Repurchases:: $27.3M in Q3 buybacks, totaling $42M YTD, with $3.1M shares remaining under the 2023 authorization.
  • Labor Market Strength:: Healthcare sector leads hiring, with stabilized wage growth and record application levels, supporting operational stability.

Operational Highlights

The company's field-based teams' operational excellence led to quality service outcomes and consistent margins. Cash collection trends remain positive, and the balance sheet is strong, with cash and marketable securities of $207.5 million. The company has an undrawn credit facility with utilization limited to LCs only. As Ted Wahl mentioned, "the majority of the quarter-over-quarter top-line growth increase was driven by new business wins, heavily weighted towards the front end of the quarter, along with 90% and strengthening client retention rates."

Growth Prospects and Industry Trends

The company's core market of long-term and post-acute care continues to gain strength, driven by a multi-decade demographic tailwind. HCSG is confident that executing on its top three strategic priorities - driving growth, managing costs, and optimizing cash flow - will enable it to drive growth while delivering sustainable, profitable results. Analysts estimate next year's revenue growth at 5.6%. The company's leadership, value proposition, business model, and strong balance sheet position it well to capitalize on industry opportunities and deliver long-term shareholder value.

Valuation and Metrics

With a P/E Ratio of 33.02 and an EV/EBITDA of 16.57, the market appears to be pricing in a certain level of growth. The company's ROE is 7.59%, and ROIC is 4.63%. The actual EPS of $0.23 beat estimates of $0.21, indicating a positive surprise. The Free Cash Flow Yield is 12.01%, suggesting a decent return for investors. The Net Debt / EBITDA ratio is -1.64, indicating a healthy debt position.

3. NewsRoom

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Brandes Investment Partners LP Sells 1,084,471 Shares of Healthcare Services Group, Inc. $HCSG

Dec -03

Source: defenseworld.net

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Healthcare Services Group, Inc. $HCSG Stock Position Raised by American Century Companies Inc.

Dec -03

Source: defenseworld.net

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Head-To-Head Survey: Healthcare Services Group (NASDAQ:HCSG) and Dalrada Financial (OTCMKTS:DFCO)

Dec -02

Source: defenseworld.net

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Healthcare Services Group (NASDAQ:HCSG) versus Willdan Group (NASDAQ:WLDN) Head to Head Analysis

Nov -30

Source: defenseworld.net

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Healthcare Services Group (NASDAQ:HCSG) vs. Legacy Education Alliance (OTCMKTS:LEAI) Head-To-Head Review

Nov -26

Source: defenseworld.net

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Bank of New York Mellon Corp Sells 8,435 Shares of Healthcare Services Group, Inc. $HCSG

Nov -22

Source: defenseworld.net

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Campbell & CO Investment Adviser LLC Acquires Shares of 27,100 Healthcare Services Group, Inc. $HCSG

Nov -17

Source: defenseworld.net

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Teacher Retirement System of Texas Sells 362,131 Shares of Healthcare Services Group, Inc. $HCSG

Nov -05

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.00%)

6. Segments

Dietary

Expected Growth: 2.0%

Dietary segment's 2.0% growth is driven by increasing demand for nutritious food services in healthcare facilities, an aging population requiring specialized diets, and Healthcare Services Group's strategic expansion into new markets and facilities, enhancing its market share.

Housekeeping

Expected Growth: 2.0%

Housekeeping from Healthcare Services Group, Inc. growth driven by increasing demand for outsourced services, aging population, and healthcare reform. Additionally, the company's focus on quality, customer satisfaction, and cost savings contribute to its 2.0% growth rate.

7. Detailed Products

Housekeeping Services

Provides cleaning and maintenance services to healthcare facilities, including patient rooms, common areas, and operating rooms.

Laundry Services

Offers laundry services, including washing, drying, and folding of linens, uniforms, and other textiles for healthcare facilities.

Dietary Services

Provides food and nutrition services, including meal planning, preparation, and delivery to patients in healthcare facilities.

Facilities Management Services

Offers maintenance, repair, and renovation services for healthcare facilities, including HVAC, plumbing, and electrical systems.

Linen Management Services

Provides linen supply and management services, including inventory management and distribution to healthcare facilities.

8. Healthcare Services Group, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Healthcare Services Group, Inc. is medium due to the presence of alternative healthcare providers and services.

Bargaining Power Of Customers

The bargaining power of customers for Healthcare Services Group, Inc. is low due to the lack of negotiating power of individual patients.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Healthcare Services Group, Inc. is medium due to the presence of multiple suppliers of medical equipment and services.

Threat Of New Entrants

The threat of new entrants for Healthcare Services Group, Inc. is low due to the high barriers to entry in the healthcare industry.

Intensity Of Rivalry

The intensity of rivalry for Healthcare Services Group, Inc. is high due to the presence of multiple competitors in the healthcare industry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 8.72%
Debt Cost 6.55%
Equity Weight 91.28%
Equity Cost 6.55%
WACC 6.55%
Leverage 9.56%

11. Quality Control: Healthcare Services Group, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Healthcare Services Group

A-Score: 4.8/10

Value: 4.0

Growth: 2.9

Quality: 5.8

Yield: 2.0

Momentum: 9.5

Volatility: 4.7

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Value: 3.2

Growth: 3.3

Quality: 4.9

Yield: 4.0

Momentum: 6.0

Volatility: 6.7

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Pennant

A-Score: 3.8/10

Value: 3.1

Growth: 8.2

Quality: 3.9

Yield: 0.0

Momentum: 2.0

Volatility: 5.3

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AirSculpt Technologies

A-Score: 3.7/10

Value: 4.6

Growth: 4.8

Quality: 2.5

Yield: 1.0

Momentum: 8.0

Volatility: 1.3

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AMN Healthcare Services

A-Score: 3.4/10

Value: 9.2

Growth: 4.7

Quality: 3.0

Yield: 0.0

Momentum: 0.0

Volatility: 3.7

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The Joint

A-Score: 3.2/10

Value: 3.3

Growth: 3.3

Quality: 4.9

Yield: 0.0

Momentum: 3.5

Volatility: 4.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

18.88$

Current Price

18.88$

Potential

-0.00%

Expected Cash-Flows