• If you are wondering whether Select Medical Holdings is attractively priced today or if the current level already reflects its potential value, this article walks you through what the numbers are really saying about the stock.
• The share price most recently closed at US$15.69, with returns of 4.3% over 7 days, 3.2% over 30 days, 5.9% year to date, 6.4% over 3 years and 15.9% over 5 years, while the 1 year return of a 15.2% decline shows that shorter term sentiment has been weaker.
• Recent news flow around Select Medical has focused on its position in the US healthcare sector and ongoing interest in companies that provide specialized care services. This helps frame how investors think about its long term role in the industry. This backdrop, together with shifting attention between defensive and growth oriented healthcare names, gives context to the recent moves in the share price.
• Our valuation framework gives Select Medical Holdings a score of 3 out of 6. This means some checks point to the shares looking inexpensive while others are more mixed. Next, we look at how different valuation methods treat the stock before considering an even richer way to think about value at the end of the article.

Approach 1: Select Medical Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth by projecting its future cash flows and then discounting those back into today’s dollars.

For Select Medical Holdings, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is reported at about $175.4 million. Simply Wall St then applies analyst estimates where available and extrapolates further, projecting free cash flow for the next decade.

These projections show free cash flow figures ranging from about $86.1 million in 2026 to around $30.5 million in 2035, all in dollars. Each of those yearly cash flows is discounted back using the model’s assumptions to reflect their value today. When you add up those discounted amounts and account for value beyond the explicit forecast period, the model arrives at an estimated intrinsic value of about $5.03 per share.

Compared with the recent share price of US$15.69, the DCF output suggests the stock is 212.2% above this estimate, which screens as expensive on this method.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Select Medical Holdings may be overvalued by 212.2%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Select Medical Holdings Price vs Earnings

For a profitable company like Select Medical Holdings, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. A higher or lower P/E often reflects how the market views the company’s growth potential and risk, with faster growth or lower perceived risk usually supporting a higher “normal” P/E.

Select Medical currently trades on a P/E of 20.62x. That compares with a Healthcare industry average P/E of about 23.59x and a peer group average of 23.06x, so the shares sit below both of those broad benchmarks. Simply Wall St also calculates a proprietary “Fair Ratio” for the stock of 24.16x, which is the P/E level it might expect given factors such as earnings growth profile, industry, profit margins, market cap and specific risks.

This Fair Ratio aims to be more tailored than a simple peer or industry comparison because it uses company specific inputs rather than a one size fits all average. Comparing the current P/E of 20.62x with the Fair Ratio of 24.16x suggests the shares trade at a discount on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Select Medical Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which simply means writing the story you believe about a company and linking that story directly to the numbers you think are reasonable.

On Simply Wall St’s Community page, Narratives let you set your own assumptions for revenue, earnings and margins. These then flow into a forecast and a fair value that you can compare with the current share price to help you decide whether the stock looks attractive, fairly priced or stretched for your goals.

Because Narratives sit on Simply Wall St’s platform, used by millions of investors, they are updated when new information such as earnings reports or news arrives. This means the fair value you see always reflects the latest data and your chosen view.

For Select Medical Holdings, one investor might build a Narrative that points to a low fair value based on cautious margin and growth assumptions, while another might arrive at a much higher fair value by expecting stronger revenue and profitability over time. Seeing those two views side by side can help you judge where your own expectations sit.

Do you think there's more to the story for Select Medical Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.