PACS Group (NYSE:PACS) is getting plenty of attention after announcing delayed SEC filings related to an Audit Committee review. The company also posted a sharp turnaround in quarterly earnings and revenue.
See our latest analysis for PACS Group.
PACS Group’s stock has captured investor attention, rocketing 47% across the past week and gaining over 43% in the last three months, as upbeat earnings and improving revenues appear to be shifting the market’s perception of risk. Despite this momentum, the total shareholder return for the past year remains slightly negative, which suggests that longer-term recovery is still a work in progress.
If PACS Group’s sharp turnaround has you watching for market moves, consider broadening your perspective and discover fast growing stocks with high insider ownership
With such a sharp surge in the share price and improving fundamentals, the central question remains: Is PACS Group now undervalued after its rebound, or has the recent rally fully priced in the company’s prospects for future growth?
PACS Group trades at a price-to-earnings (P/E) ratio of 28.3x, which is noticeably higher than both its direct peers and the broader healthcare sector average. At the last close of $16.83, the stock is priced at a premium relative to these benchmarks, implying investors are paying more for each dollar of PACS’s earnings compared to most competitors.
The price-to-earnings ratio is a quick way to gauge how much investors are willing to pay right now for a company’s earnings power. For a healthcare provider like PACS, this multiple captures the market’s confidence in future profit growth, but also its sensitivity to recent swings in profits or volatility in the business.
In PACS Group’s case, the premium multiple may signal optimism about its fast turnaround and projected growth. However, it stands well above the industry average P/E of 21.9x and the peer group average of 13.6x. This kind of gap means the market is assigning significantly higher expectations to PACS than to the average healthcare stock. Compared to its estimated fair price-to-earnings ratio of 48.6x, there could still be some upside if PACS delivers on its aggressive growth outlook.
Explore the SWS fair ratio for PACS Group
Result: Price-to-Earnings of 28.3x (OVERVALUED)
However, risks such as ongoing regulatory scrutiny or potential swings in healthcare demand could quickly challenge PACS Group’s currently optimistic outlook.
Find out about the key risks to this PACS Group narrative.
While the price-to-earnings ratio paints an optimistic picture, our SWS DCF model suggests otherwise. With shares currently trading at $16.83 while our DCF estimate of fair value is only $2.59, the stock appears significantly overvalued according to discounted cash flows. Does this stark difference point to overlooked risks, or is the market betting on a bigger recovery?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out PACS Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 897 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
If our analysis does not match your perspective or you would rather dig into the numbers firsthand, you can craft your own insights in just a few minutes. Do it your way
A great starting point for your PACS Group research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.
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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.
Companies discussed in this article include PACS.
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