For investors looking for chances in the market, the disciplined method of value investing stays a key strategy. Its foundation is finding companies trading below their inherent value, usually decided by examining financial condition, earnings, and future possibilities. The aim is to discover good businesses the market has briefly priced too low, offering a possible "margin of safety" for the patient investor. One way to find these candidates is by filtering for stocks with good valuation measures and acceptable basic financials.
Pediatrix Medical Group Inc (NYSE:MD), a national provider of physician services focused on neonatal, maternal-fetal, and pediatric critical care, recently appeared from this kind of filter. The company's basic financial picture indicates it might be the type of undervalued chance value investors commonly look for.
An Interesting Valuation View
The most notable part of Pediatrix's current position is its valuation, which receives a high 9 out of 10 in ChartMill's basic rating model. This rating shows the stock is priced low compared to both its own financial results and similar companies. For a value investor, a low purchase price compared to a company's profits and cash flow is the first essential step, as it creates the basis for that crucial margin of safety.
- Price-to-Earnings (P/E) Ratio: At 10.68, MD's P/E ratio is viewed as fair and is much lower than the S&P 500 average of 26.59. Significantly, it costs less than about 89% of similar companies in the Health Care Providers & Services industry.
- Forward P/E Ratio: The valuation seems even more appealing looking ahead, with a Price/Forward Earnings ratio of 9.67. This makes it less expensive than more than 91% of industry rivals.
- Cash Flow Valuation: The stock also seems inexpensive based on cash production, with a Price/Free Cash Flow ratio higher than 90% of the industry. Its Enterprise Value to EBITDA ratio adds to this, being more positive than 81% of similar companies.
Evaluating Financial Condition and Earnings
An inexpensive stock is only a worthwhile find if the company is fundamentally stable. Value investing needs examining more than the price to confirm the business is stable and profitable enough to continue and increase its inherent value over the long term. Pediatrix's scores of 5 for Financial Condition and 6 for Earnings indicate a steady, if not outstanding, operational foundation.
The company shows good earnings measures that do better than many in its field:
- A Return on Equity (ROE) of 18.21% and a Return on Assets (ROA) of 7.37% both are in the best quarter of its industry.
- Its Profit Margin of 8.44% and Operating Margin of 12.20% are also with the top in the comparison group.
Financially, the company keeps sufficient liquidity with Current and Quick Ratios of 1.83, which are higher than most rivals. Its debt amount, shown by a Debt-to-Equity ratio of 0.65, is acceptable and normal for the industry. A positive point is its Debt to Free Cash Flow ratio of 2.20, showing it could pay off all debt in slightly more than two years with its present cash flow, a signal of financial adaptability that is higher than almost 80% of similar companies.
Growth Path and Points to Note
Growth is the last part for a value investor, as it helps push future inherent value. Pediatrix's Growth rating is a low 4, showing a varied but possibly getting better situation. The last year had a large 56.92% increase in Earnings Per Share (EPS), though this follows a time of past EPS drops. Revenue increase has been small, with a small reduction over the last year.
The future view, however, suggests stabilization and picking up speed. Experts project EPS growth to average 7.64% each year in the next few years, which is a change from the past pattern. For a value investor, this mix of a low valuation with forecasts of going back to steady, small growth can be an interesting situation, as it might not be completely recognized by the wider market.
Is Pediatrix a Value Chance?
Bringing these parts together, Pediatrix Medical Group shows a position that matches various value investing ideas. It is priced at a clear reduction to the market and its industry using several measures, meeting the main need of looking for undervaluation. Its earnings are strong, and its financial condition, while not ideal, shows force in important parts like cash flow compared to debt. The growth story is one of improvement and small forward movement instead of very fast growth, which is often already included in more costly stocks.
The basic examination indicates MD might be a possibility for investors using a careful, value-focused plan, searching for a fairly priced company in the necessary healthcare field. You can see the complete, thorough basic report for Pediatrix Medical Group Inc here.
This review of Pediatrix was found using a filter for stocks with high valuation ratings and acceptable basic financials. Investors curious about finding other possible chances can look at the Decent Value Stocks screen for more outcomes.
Disclaimer: This article is for information only and is not financial guidance, a suggestion, or an offer to purchase or sell any security. Investing has risk, including the possible loss of the original investment. You should do your own investigation and talk with a certified financial consultant before making any investment choices.
