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1. Company Snapshot

1.a. Company Description

Select Medical Holdings Corporation, through its subsidiaries, operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States.The company's Critical Illness Recovery Hospital segment consists of hospitals that provide services for heart failure, infectious disease, respiratory failure and pulmonary disease, surgery requiring prolonged recovery, renal disease, neurological events, and trauma.Its Rehabilitation Hospital segment offers therapy and rehabilitation treatments, including rehabilitative services for brain and spinal cord injuries, strokes, amputations, neurological disorders, orthopedic conditions, pediatric congenital or acquired disabilities, and cancer.


The company's Outpatient Rehabilitation segment operates rehabilitation clinics that provide physical, occupational, and speech rehabilitation programs and services; and specialized programs, such as functional programs for work related injuries, hand therapy, post-concussion rehabilitation, pediatric and cancer rehabilitation, and athletic training services.Its Concentra segment operates and provides occupational health centers and contract services at employer worksites that deliver occupational medicine, consumer health, physical therapy, and wellness services.As of December 31, 2021, the company operated 104 critical illness recovery hospitals in 28 states; 30 rehabilitation hospitals in 12 states; 1,881 outpatient rehabilitation clinics in 38 states and the District of Columbia; and 518 occupational health centers in 41 states, and 134 onsite clinics at employer worksites states.


Select Medical Holdings Corporation was founded in 1996 and is headquartered in Mechanicsburg, Pennsylvania.

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1.b. Last Insights on SEM

Select Medical Holdings Corporation's recent performance is driven by several positive factors. The company's Q3 earnings beat, with revenue growth attributed to increased patient volumes, is a significant driver. Additionally, the executive chairman's proposal to take the company private at a 15.6% premium to the latest close has drawn investor focus. The company also raised its 2025 EPS guidance, indicating a positive outlook. Furthermore, Select Medical's valuation remains attractive, with a potential upside of 35.9% to 36.5% according to analysts' price targets (Zacks, 2025).

1.c. Company Highlights

2. Select Medical Holdings Corporation's Q3 2025 Earnings Report: A Closer Look

Select Medical Holdings Corporation reported a strong financial performance in the third quarter of 202, with revenue growing over 7% to $1.36 billion, compared to $1.27 billion in the prior year. Adjusted EBITDA also increased by 7% to $111.7 million, up from $103.9 million. Earnings per common share from continuing operations rose by 21% to $0.23, beating analyst estimates of $0.18. As Thomas Mullin, the company's executive, noted, the growth was driven by a combination of factors, including the acquisition of a 30-bed critical illness recovery hospital and an expansion of their outpatient portfolio.

Publication Date: Nov -05

📋 Highlights
  • Revenue and EBITDA Growth:: Revenue increased 7% to $1.36 billion and adjusted EBITDA rose 7% to $111.7 million, driven by operational expansion and strategic acquisitions.
  • 2025 Guidance Update:: Earnings per share guidance raised to $1.14–$1.24, while EBITDA guidance remains at $510–$530 million amid outpatient segment softness.
  • Capital Allocation Plan:: $180–200 million allocated for 2025, with $100–105 million for maintenance and $80–95 million for growth initiatives, including new inpatient beds.
  • 20% Transmittal Impact:: Delayed rule provided $12–15 million EBITDA benefit in Q3 2025, with smaller re-implementation effects in 2026 due to labor cost normalization.
  • Inpatient Expansion Target:: 395 new inpatient rehab beds expected by mid-2027 via new facilities and strategic additions, focusing on high-margin LTAC-to-rehab transitions.

Revenue Growth and Segment Performance

The company's revenue growth was driven by a 7% increase in revenue, with the LTAC segment being impacted by the high-cost outlier, which had a negative effect on admission volume and occupancy. However, the company was able to mitigate this impact by using their inpatient rehab hospitals as downstream opportunities to get patients moved from the LTAC to the inpatient rehab. The outpatient segment saw some softness, with a 5% increase in volume but pressure on rates due to the Medicare headwind.

Outlook and Guidance

Select Medical reaffirmed its business outlook for 2025, expecting revenue to be in the range of $5.3 billion to $5.5 billion and adjusted EBITDA to be in the range of $510 million to $530 million. The company also increased its estimate for earnings per common share to be in the range of $1.14 to $1.24. Looking ahead to 2026, the company expects a slight tailwind from an increase in Medicare rates for Medicare Advantage payers, with Thomas Mullin noting that inpatient rehab will see growth with new hospitals and converting LTAC beds.

Valuation and Growth Expectations

With a P/E Ratio of 15.01 and an EV/EBITDA of 5.45, the market is pricing in a moderate growth expectation. Analysts estimate a 4.6% revenue growth for the next year, which is slightly higher than the industry average. The company's ROE of 6.51% and ROIC of 4.49% indicate a relatively healthy profitability. The dividend yield of 1.91% and free cash flow yield of 10.5% also make the stock an attractive option for income investors.

3. NewsRoom

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Take SEM Off the Menu? Executive Chairman Gives Premium Offer

Nov -25

Source: zacks.com

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Select Medical Holdings Corporation Acknowledges Executive Chairman's Take-Private Proposal

Nov -25

Source: prnewswire.com

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Envestnet Asset Management Inc. Reduces Holdings in Select Medical Holdings Corporation $SEM

Nov -17

Source: defenseworld.net

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Select Medical Down 5% Despite Q3 Earnings Beat on Patient Volumes

Nov -12

Source: zacks.com

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Select Medical (SEM) Is Attractively Priced Despite Fast-paced Momentum

Nov -05

Source: zacks.com

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Does Select Medical (SEM) Have the Potential to Rally 35.9% as Wall Street Analysts Expect?

Nov -05

Source: zacks.com

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86,875 Shares in Select Medical Holdings Corporation $SEM Purchased by Y Intercept Hong Kong Ltd

Nov -03

Source: defenseworld.net

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Select Medical Holdings Corporation (SEM) Q3 2025 Earnings Call Transcript

Oct -31

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.43%)

6. Segments

Critical Illness Recovery Hospital

Expected Growth: 3.5%

Critical Illness Recovery Hospital's 3.5% growth is driven by increasing demand for post-acute care, aging population, and rising healthcare expenditures. Additionally, Select Medical's strategic partnerships, expanded service offerings, and efficient operations contribute to the segment's growth.

Concentra

Expected Growth: 3.8%

Concentra's 3.8% growth is driven by increasing demand for occupational health services, expansion of its medical centers, and strategic partnerships. Additionally, the company's focus on providing high-quality, cost-effective care and its ability to adapt to changing healthcare regulations have contributed to its growth.

Outpatient Rehabilitation

Expected Growth: 3.2%

Outpatient Rehabilitation from Select Medical Holdings Corporation's 3.2% growth driven by increasing demand for post-acute care, aging population, and expansion of services into new markets. Additionally, the shift towards value-based care and cost-effective treatment options also contribute to the segment's growth.

Rehabilitation Hospital

Expected Growth: 3.0%

Strong demand for post-acute care services, increasing Medicare reimbursement rates, and strategic partnerships drive growth for Rehabilitation Hospital from Select Medical Holdings Corporation. Additionally, the company's focus on expanding its network of hospitals and investing in technology to improve patient outcomes contribute to its 3.0% growth rate.

Other

Expected Growth: 2.8%

Select Medical Holdings Corporation's 2.8% growth is driven by increasing demand for outpatient rehabilitation services, expansion of its occupational health business, and strategic acquisitions. Additionally, the company's focus on cost containment and operational efficiencies has contributed to its growth. Furthermore, the shift towards value-based care and the need for post-acute care services have also supported the company's growth momentum.

7. Detailed Products

Inpatient Rehabilitation Hospitals

Provides intensive rehabilitation services to patients who have been impaired by a physical disability, injury, or illness.

Long-Term Acute Care Hospitals

Offers extended medical care to patients who require ongoing treatment for complex medical conditions.

Medical Rehabilitation Centers

Provides outpatient rehabilitation services to patients who require physical, occupational, or speech therapy.

Occupational Health Services

Offers occupational health services, including injury care, physical therapy, and wellness programs, to employers and their employees.

Concentra Urgent Care Centers

Provides urgent care services for non-life-threatening injuries and illnesses, including occupational health services.

8. Select Medical Holdings Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Select Medical Holdings Corporation operates in a niche market, providing specialized healthcare services. While there are some substitutes available, they are not as effective or convenient, reducing the threat of substitutes.

Bargaining Power Of Customers

Select Medical Holdings Corporation's customers are primarily patients and healthcare providers. While they have some bargaining power, it is limited due to the specialized nature of the services provided.

Bargaining Power Of Suppliers

Select Medical Holdings Corporation relies on a network of suppliers for medical equipment, pharmaceuticals, and other essential goods. While suppliers have some bargaining power, the company's size and diversification mitigate this threat.

Threat Of New Entrants

Entering the healthcare services market requires significant capital investment, regulatory compliance, and specialized expertise. These barriers to entry reduce the threat of new entrants.

Intensity Of Rivalry

The healthcare services market is highly competitive, with many established players vying for market share. Select Medical Holdings Corporation must continually innovate and improve its services to maintain its competitive edge.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 79.38%
Debt Cost 5.11%
Equity Weight 20.62%
Equity Cost 10.81%
WACC 6.29%
Leverage 384.97%

11. Quality Control: Select Medical Holdings Corporation 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

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Select Medical

A-Score: 3.8/10

Value: 6.8

Growth: 4.3

Quality: 2.5

Yield: 3.0

Momentum: 1.0

Volatility: 5.3

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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

14.91$

Current Price

14.91$

Potential

-0.00%

Expected Cash-Flows