Surgery Partners (NASDAQ: SGRY) and Surgical Care Affiliates (NASDAQ:SCAI) are both medical companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, institutional ownership, analyst recommendations, risk and profitabiliy.

Valuation and Earnings

This table compares Surgery Partners and Surgical Care Affiliates’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Surgery Partners $1.14 billion 0.95 $245.68 million $0.28 79.46
Surgical Care Affiliates N/A N/A N/A $0.55 101.58

Surgery Partners has higher revenue and earnings than Surgical Care Affiliates. Surgery Partners is trading at a lower price-to-earnings ratio than Surgical Care Affiliates, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Surgery Partners and Surgical Care Affiliates’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Surgery Partners 1.19% 8.88% 1.25%
Surgical Care Affiliates 1.88% 7.00% 2.98%

Institutional & Insider Ownership

39.2% of Surgery Partners shares are held by institutional investors. 7.1% of Surgery Partners shares are held by insiders. Comparatively, 3.3% of Surgical Care Affiliates shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

Surgery Partners has a beta of 1.87, suggesting that its share price is 87% more volatile than the S&P 500. Comparatively, Surgical Care Affiliates has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Surgery Partners and Surgical Care Affiliates, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Surgery Partners 0 2 3 0 2.60
Surgical Care Affiliates 0 4 1 0 2.20

Surgery Partners currently has a consensus target price of $21.20, suggesting a potential downside of 4.72%. Surgical Care Affiliates has a consensus target price of $49.00, suggesting a potential downside of 12.30%. Given Surgery Partners’ stronger consensus rating and higher possible upside, equities analysts clearly believe Surgery Partners is more favorable than Surgical Care Affiliates.

Summary

Surgery Partners beats Surgical Care Affiliates on 8 of the 11 factors compared between the two stocks.

Surgery Partners Company Profile

Surgery Partners, Inc. is a healthcare services company. The Company operates in three lines of business across the United States: Surgical Facility Services, Ancillary Services and Optical Services. The Company’s Surgical Facility Services segment consists of the operation of ambulatory surgery centers (ASCs) and surgical hospitals, which include its anesthesia services. The Company’s surgical facilities primarily provide non-emergency surgical procedures across a range of specialties, which include gastrointestinal (GI), general surgery, ophthalmology, orthopedics and pain management. The Company’s Ancillary Services segment consists of a diagnostic laboratory, a specialty pharmacy and multi-specialty physician practices. The Company’s physician practices include its owned and operated physician practices pursuant to long-term management service agreements. The Company’s Optical Services segment consists of an optical laboratory, an optical products group purchasing organization.

Surgical Care Affiliates Company Profile

Surgical Care Affiliates, Inc. is a provider of solutions to physicians, health plans and health systems to optimize surgical care. The Company offers tools and systems in the areas of clinical benchmarking, clinical best practices, operating efficiency, care coordination and supply chain management. As of December 31, 2016, the Company operated a network of surgical facilities in the United States, which included 197 ambulatory surgery centers (ASCs) and seven surgical hospitals in partnership with approximately 3,000 physician partners. The Company’s operations consist of its ownership and management of ASCs and surgical hospitals. Its ASCs provide the facilities, equipment, supplies and clinical support staff necessary to provide non-emergency surgical services to patients not requiring hospitalization. Its surgical hospitals allow physicians to perform a range of surgical procedures, including surgeries, and allow patients to stay in the hospital for several nights to recover.

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