What Happened?
Shares of healthcare services company Select Medical (NYSE: SEM) fell 5.6% in the afternoon session after the company reported third-quarter results that, while beating market expectations, showed a significant decline in sales and profit compared to the previous year. Although the healthcare services company's revenue of $1.36 billion and earnings per share of $0.23 surpassed analyst estimates, the figures told a different story when compared to the same period in the prior year. Sales fell by 22.6% from a year ago, when the company posted revenues of $1.76 billion. Similarly, profit per share dropped from $0.43 in the same quarter last year. The company's operating profit margin also tightened, falling by 2.7 percentage points, which showed it was less efficient with its spending relative to its revenue. These steep year-over-year drops in key financial metrics appeared to outweigh the positive news of beating analyst forecasts.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Select Medical? Access our full analysis report here.
What Is The Market Telling Us
Select Medical’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 23 days ago when the stock gained 14.3% on the news that RBC Capital raised its price target on the stock to $20 from $16, citing positive regulatory developments for the healthcare provider. The firm highlighted a decision by the Centers for Medicare & Medicaid Services (CMS) to delay a new rule, which was interpreted as a favorable sign for the industry. This move was expected to give Select Medical a one-time benefit in the third quarter of 2025, helping to offset some earlier financial difficulties.
Select Medical is down 27.4% since the beginning of the year, and at $13.64 per share, it is trading 66.1% below its 52-week high of $40.20 from November 2024. Investors who bought $1,000 worth of Select Medical’s shares 5 years ago would now be looking at an investment worth $605.42.
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