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Healthcare Services (HCSG)
NASDAQ:HCSG
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Healthcare Services
(NASDAQ:HCSG)
64Neutral
Positive Factors
Financial Performance
Management guided to mid-teens revenue growth and cash flow from operations of $45M-$60M, with new contracts weighted towards Dining cross-sells.
Valuation
With improving and consistent core growth and expanding margins, HCSG’s valuation should begin to rise more in line with other high ROIC services companies.
Negative Factors
Revenue Collection
Financial distress related to a number of clients have affected revenue collection.
Healthcare Services (HCSG) vs. S&P 500 (SPY)
Market Cap
$790.73M
Dividend YieldN/A
Average Volume (3M)513.90K
Price to Earnings (P/E)20.2
Beta (1Y)0.76
Revenue Growth2.65%
EPS Growth3.34%
CountryUS
Employees33,400
SectorHealthcare
Sector Strength77
IndustryHealthcare Providers & Services
Share Statistics
EPS (TTM)0.53
Shares Outstanding73,487,740
10 Day Avg. Volume486,273
30 Day Avg. Volume513,905
Financial Highlights & Ratios
PEG Ratio6.04
Price to Book (P/B)N/A
Price to Sales (P/S)0.46
Price to Cash Flow (P/CF)5.40
P/FCF Ratio5.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$14.67Price Target Upside36.34% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
Healthcare Services Business Overview & Revenue Model
Company DescriptionHealthcare Services Group, Inc. (HCSG) is a prominent provider of management, administrative, and operational support services to the healthcare industry, particularly long-term care facilities and hospitals. The company specializes in offering housekeeping, laundry, linen, facility maintenance, and dietary services, enabling healthcare institutions to focus on patient care while outsourcing essential support functions. HCSG operates across the United States, serving a diverse clientele with tailored solutions that enhance operational efficiency and compliance with healthcare regulations.
How the Company Makes MoneyHealthcare Services Group, Inc. generates revenue primarily through service contracts with healthcare facilities, including nursing homes, rehabilitation centers, and hospitals. These contracts typically involve long-term agreements where HCSG provides comprehensive housekeeping, laundry, and dietary services. The company charges its clients a fee for these services, often based on the size of the facility or the scope of services provided. HCSG's revenue model benefits from economies of scale, which allows it to offer competitive pricing while maintaining profitability. Additionally, HCSG may engage in strategic partnerships with healthcare organizations to expand its service offerings and reach new markets, further contributing to its revenue streams.
Healthcare Services Financial Statement Overview
Summary
Healthcare Services demonstrates financial stability with consistent revenue growth and improving operational efficiency. The balance sheet is robust with low leverage, while cash flows are healthy, supporting future growth and operational needs. However, profitability margins could be enhanced for better valuation.Income Statement
Healthcare Services shows a stable, albeit slow, revenue growth trajectory. The gross profit margin is very high due to a unique financial structuring without typical cost of goods sold. However, net profit margins are relatively modest, indicating higher operational costs or financial expenses. EBIT and EBITDA margins have shown improvement over the years, suggesting better operational efficiency recently.65
Positive
Balance Sheet
The company maintains a strong equity base with a low debt-to-equity ratio, indicating conservative leverage. Return on Equity (ROE) reflects moderate profitability on shareholders' investment. High equity ratio underscores financial stability, suggesting ample asset backing and lower financial risk.70
Positive
Cash Flow
Operating cash flow generation appears consistent, with a positive trend in free cash flow despite fluctuations in capital expenditures. The Free Cash Flow to Net Income ratio suggests efficient cash conversion, while the operating cash flow to net income ratio supports profitability adequacy.68
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.72B | 1.67B | 1.69B | 1.64B | 1.76B | Gross Profit |
| 1.72B | 214.75M | 193.84M | 226.88M | 267.99M | EBIT |
| 1.53B | 62.36M | 53.50M | 31.05M | 90.96M | EBITDA |
| 73.96M | 75.21M | 62.94M | 77.88M | 144.83M | Net Income Common Stockholders |
| 39.47M | 38.39M | 34.24M | 48.54M | 98.68M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 107.31M | 147.46M | 121.48M | 185.19M | 264.34M | Total Assets |
| 802.77M | 790.65M | 718.33M | 777.53M | 785.03M | Total Debt |
| 8.03M | 36.23M | 33.10M | 11.30M | 11.36M | Net Debt |
| -48.74M | -18.09M | 6.82M | -59.49M | -127.97M | Total Liabilities |
| 302.85M | 334.04M | 292.16M | 324.85M | 304.57M | Stockholders Equity |
| 499.93M | 456.62M | 426.17M | 452.68M | 480.46M |
| Cash Flow | Free Cash Flow | |||
| 24.47M | 38.09M | -13.38M | 31.42M | 212.87M | Operating Cash Flow |
| 30.80M | 43.50M | -8.17M | 37.11M | 217.21M | Investing Cash Flow |
| 6.05M | -3.29M | 2.58M | -22.99M | -36.84M | Financing Cash Flow |
| -31.05M | -12.15M | -38.93M | -82.65M | -68.37M |
Healthcare Services Technical Analysis
Neutral
10.76
Price Trends
11.11
Negative
11.38
Negative
11.07
Negative
Market Momentum
-0.11
Negative
56.81
Neutral
87.05
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HCSG, the sentiment is Neutral. The current price of 10.76 is above the 20-day moving average (MA) of 10.65, below the 50-day MA of 11.11, and below the 200-day MA of 11.07, indicating a neutral trend. The MACD of -0.11 indicates Negative momentum. The RSI at 56.81 is Neutral, neither overbought nor oversold. The STOCH value of 87.05 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for HCSG.
Healthcare Services Risk Analysis
Healthcare Services disclosed 23 risk factors in its most recent earnings report. Healthcare Services reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Healthcare Services Peers Comparison
Overall Rating
UnderperformOutperform
Sector (49)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $29.48B | 9.52 | 12.65% | ― | 5.89% | 27.09% | |
72 Outperform | $9.98B | 22.26 | 24.52% | 0.64% | 11.91% | 28.47% | |
70 Outperform | $8.76B | 30.01 | 27.12% | 0.32% | 7.37% | 11.17% | |
66 Neutral | $3.02B | 70.68 | 3.93% | ― | 5.01% | ― | |
64 Neutral | $790.73M | 20.17 | 8.25% | ― | 2.65% | 3.34% | |
61 Neutral | $1.72B | 22.38 | 8.78% | ― | 9.06% | 10.68% | |
49 Neutral | $7.00B | >-0.01 | -53.72% | 2.41% | 24.70% | -2.97% |
* Healthcare Sector Average
Performance Comparison
HCSG
Healthcare Services
11.03
-1.27
-10.33%
ADUS
Addus Homecare
94.71
-3.87
-3.93%
AMED
Amedisys
92.09
-1.05
-1.13%
CNC
Centene
58.57
-18.18
-23.69%
CHE
Chemed
598.50
-43.14
-6.72%
EHC
Encompass Health
96.99
20.60
26.97%
Healthcare Services Earnings Call Summary
Earnings Call Date: Feb 12, 2025 | % Change Since: -1.28% | Next Earnings Date: Apr 23, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong revenue and cash flow performance, positive industry trends, and a strategic focus on growth and cash optimization. However, there were challenges with cost management and cash flow variability linked to new business expansions.Highlights
Strong Revenue and Cash Flow
Revenue for Q4 2024 was reported at $437.8 million, with a net income of $11.9 million and a cash flow from operations of $36.2 million. Excluding changes in payroll accrual, cash flow from operations was $27.0 million.
Positive Industry Trends
The industry is benefiting from a demographic tailwind, with rising occupancy rates, increased workforce availability, and stable reimbursement environments, including a 4.2% increase in Medicare rates.
2025 Growth and Strategic Priorities
The company projects mid-single digit revenue growth for 2025, with an estimated Q1 revenue range of $440 million to $450 million. Strategic priorities include driving growth, managing costs, and optimizing cash flow.
Liquidity and Capital Allocation
The company ended 2024 with $135.8 million in cash and marketable securities and a $500 million credit facility. Capital allocation priorities include organic growth, inorganic growth opportunities, and share repurchases.
Lowlights
Costs and Margin Pressures
Cost of services was 86.6%, slightly above the target range due to new business startup costs. SG&A was also elevated, with expectations to track between 9.5% and 10.5% in the near term.
Cash Flow Variability
The company slightly missed its full-year cash flow target, mainly due to higher than expected new business adds. The cash flow from operations excluding payroll accrual is expected to be between $45 million and $60 million for 2025, with variability due to new business timing.
Company Guidance
During Healthcare Services Group, Inc.'s fourth quarter 2024 earnings call, the company reported several key metrics and provided guidance for 2025. The company reported Q4 revenue of $437.8 million, with net income and diluted EPS at $11.9 million and $0.16 respectively. Cash flow from operations was $36.2 million, with $27.0 million excluding payroll accrual changes. Looking forward, Healthcare Services Group expects mid-single digit revenue growth for 2025, estimating Q1 revenue between $440 million and $450 million. They aim to manage cost of services around 86% and SG&A expenses between 8.5% and 9.5%. The company also anticipates actual cash flow from operations in 2025, excluding payroll accrual changes, to range from $45 million to $60 million. The call highlighted optimism driven by demographic trends, industry growth, and strategic priorities, including organic growth, cost management, and cash flow optimization.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.