Is Surgery Partners, Inc. overvalued or undervalued?

As of 6 August 2024, the valuation grade for Surgery Partners, Inc. has moved from fair to risky, indicating a shift in perception regarding its investment potential. The company appears to be overvalued based on its current metrics, particularly with a P/E ratio of 39, which is significantly higher than the peer average of approximately 31.47 for comparable firms. Additionally, its EV to EBITDA ratio stands at 8.95, while peers like Universal Health Services, Inc. have a more favorable EV to EBITDA of 6.78, further highlighting the relative overvaluation.
In terms of profitability, Surgery Partners has a ROE of 4.40%, which is considerably lower than the industry average, suggesting inefficiencies in generating returns for shareholders. The stock has underperformed against the S&P 500, with a year-to-date return of 4.06% compared to the index's 12.22%, and a one-year return of -31.50% versus 17.14% for the S&P 500. This underperformance reinforces the notion that Surgery Partners, Inc. is currently overvalued in the market.