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what it is
It runs rehab hospitals, long-term recovery hospitals, and 1,911 outpatient clinics across the U.S.
how it gets paid
Last year Select Medical made $5.5B in revenue. critical illness recovery hospitals was the main engine at $1.90B, or 34% of sales.
why it's growing
Revenue grew 5.1% last year. Annual revenue still reached $5.5B, up 5.1% vs. prior year, but recent quarterly EPS has been choppy.
what just happened
The last report delivered $0.16 in EPS versus a $0.26 estimate, a 38.46% miss.
At a glance
B balance sheet — gets the job done, barely
45/100 earnings predictability — expect surprises
13.1x trailing p/e — the market's not buying it — or you found a deal
1.8% dividend yield — cash in your pocket every quarter
4.5% return on capital — nothing to write home about
xvary composite: 40/100 — below average
What they do
It runs rehab hospitals, long-term recovery hospitals, and 1,911 outpatient clinics across the U.S.
The moat is physical footprint. Select Medical operates 104 critical illness recovery hospitals, 35 inpatient rehabilitation facilities, and 1,911 outpatient rehab clinics as of 3/31/25. Scale matters here because referrals follow beds, therapists, and contracts already in place, which means your local discharge planner is more likely to send patients into an existing network than start from zero.
How they make money
$5.5B
annual revenue · their business grew +5.1% last year
critical illness recovery hospitals
$1.90B
+2.0%
inpatient rehabilitation facilities
$1.45B
+3.0%
outpatient rehabilitation clinics
$1.55B
+5.1%
contract rehabilitation services
$0.60B
+1.0%
The products that matter
cares for high-acuity patients
Critical Illness Recovery Hospitals
104 facilities
this is the operating hinge right now: through nine months, revenue was relatively flat while EBITDA fell to $199M from $239M.
turnaround watch
post-acute rehab care
Inpatient Rehabilitation Facilities
35 facilities
these 35 sites are part of a 139-facility hospital network supporting the company’s $5.5B revenue base.
network scale
outpatient therapy footprint
Outpatient Rehabilitation Clinics
part of the $5.5B business
the snapshot doesn’t break out clinic revenue, which is the point: you’re buying the whole care network, not a clean segment story.
data is thin
Key numbers
$1.7B
long-term debt
Long-term debt → money owed beyond one year → so what: debt equals 47% of capital, which means your upside depends on a leveraged balance sheet staying calm.
13.1x
trailing p/e
P/E → stock price divided by earnings → so what: you are paying a low multiple, but low multiples often show up when the market distrusts the earnings.
4.5%
return on capital
Return on capital → profit generated from money invested in the business → so what: 4.5% is weak for a company carrying $1.7B of debt.
1.8%
dividend yield
Dividend yield → cash paid to shareholders each year as a percent of the stock price → so what: you get some income, but not enough to mask big operating mistakes.
Financial health
B
strength
- balance sheet grade B — adequate — nothing special
- risk rank 4 — safer than 20% of stocks
- price stability 25 / 100
- long-term debt $1.7B (47% of capital)
- net profit margin 4.7% — keeps 5 cents of every dollar in revenue
- return on equity 10% — $0.10 profit for every $1 investors have put in
B — functional but not a standout on the balance sheet.
Total return vs. market
You invested $10,000 in SEM 3 years ago → it's now worth $10,860.
The index would have given you $13,880.
source: institutional data · total return
What just happened
missed estimates
The last report delivered $0.16 in EPS versus a $0.26 estimate, a 38.46% miss.
Annual revenue still reached $5.5B, up 5.1% vs. prior year, but recent quarterly EPS has been choppy. Quarterly EPS ran $0.44, $0.32, $0.23, and $0.26 in 2025, which is stable enough to operate but not enough to inspire.
$5.5B
revenue
$0.16
eps
10.0%
operating margin
the number that mattered
The key number was the $0.10 EPS shortfall versus estimates, because cheap stocks stay cheap when earnings keep missing.
-
select medical’s share price has bounced a bit after a steady descent over the past year.
-
not much news has been reported since the release of third-quarter financial results in october.the company’s fourth-quarter results were scheduled to be publicized shortly after we went to press with this issue.
-
we look for earnings to rise by a dime per share in 2026.the expected increase depends to a large degree on an operating recovery at the critical illness hospital division. through nine months ended september 30th, this unit posted relatively flat revenue compared with the year-ago period.
-
however, ebitda fell from $239 million to $199 million, though third-quarter results were slightly positive.the company did receive a beneficial impact from expense reversals in the quarter that boosted ebitda by about $15 million.
-
reimbursement policy questions are still not fully resolved, but the upcoming conference call may shed some light on the treatment of high-acute outlier populations for which management contends that select is not adequately compensated.
source: company earnings report, 2026
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What could go wrong
the #1 risk is medicare and medicaid reimbursement pressure on critical illness and rehab care.
high
reimbursement pressure
changes to medicare and medicaid rates directly hit revenue, and management has already flagged underpayment for high-acute outlier populations.
this touches the full $5.5B revenue base
med
critical illness hospital recovery stalls
through nine months, revenue in that division was relatively flat while EBITDA dropped to $199M from $239M. the 2026 earnings setup depends on that trend reversing.
a weak recovery would pressure the $1.35 EPS expectation
med
thin margins plus fixed debt
a 4.3% net margin does not leave much room for operational slippage, and $1.7B of long-term debt does not get cheaper because admissions get messy.
47% of capital is debt-backed
low
earnings quality looks better than it feels
the quarter got about a $15M EBITDA boost from expense reversals. that helped results, but it is not durable operating leverage.
headline improvement can fade if one-offs disappear
reimbursement pressure plus a stalled hospital recovery would hit a business that kept just 4.3 cents of profit on each revenue dollar last year.
source: institutional data · regulatory filings · risk analysis
Pay attention to
metric
critical illness hospital EBITDA
$199M through nine months versus $239M a year earlier is the clearest sign the core recovery is still incomplete.
risk
high-acute outlier reimbursement
management says these patients are not being adequately compensated. if that does not improve, margin pressure stays real.
calendar
the next conference call
the company said the upcoming call may offer more clarity on reimbursement treatment. that is not filler. it is the key policy update.
trend
whether the EPS rebound is operational
full-year EPS rose to $1.25 from $0.51, but a $15M expense reversal helped EBITDA. you want cleaner improvement next.
Analyst rankings
risk profile
below average
stability score 4 means the stock has been less stable than most. in human-speak, this is not the sleepy defensive healthcare name some investors expect.
earnings predictability
45 / 100
forecasting earnings here is harder than it should be for a hospital operator. that fits the recent mix of rebound headlines and still-thin margins.
source: institutional data
Institutional activity
institutions have been net buying for 3 consecutive quarters — 135 buyers vs. 131 sellers in 3q2025. total institutional holdings: 0.1B shares. net buying for 3 quarters.
source: institutional data
Price targets
3-5 year target range
$10
$30
$16
current price
$20
target midpoint · +22% from current · 3-5yr high: $35 (+115% · 19% ann'l return)
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