Pediatrix Medical Group trades at $16.23 per share and has stayed right on track with the overall market, gaining 15.3% over the last six months. At the same time, the S&P 500 has returned 17.5%.

Is now the time to buy Pediatrix Medical Group, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Pediatrix Medical Group Will Underperform?

We're sitting this one out for now. Here are three reasons you should be careful with MD and a stock we'd rather own.

1. Same-Store Sales Falling Behind Peers

Investors interested in Specialized Medical & Nursing Services companies should track same-store sales in addition to reported revenue. This metric measures the change in sales at brick-and-mortar locations that have existed for at least a year, giving visibility into Pediatrix Medical Group’s underlying demand characteristics.

Over the last two years, Pediatrix Medical Group’s same-store sales averaged 4.3% year-on-year growth. This performance slightly lagged the sector and suggests it might have to change its strategy or pricing, which can disrupt operations.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Pediatrix Medical Group’s revenue to drop by 1.5%, close to its 1.9% annualized growth for the past five years. This projection is underwhelming and indicates its newer products and services will not lead to better top-line performance yet.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Pediatrix Medical Group’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

We cheer for all companies helping people live better, but in the case of Pediatrix Medical Group, we’ll be cheering from the sidelines. That said, the stock currently trades at 9.8× forward P/E (or $16.23 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.

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