Surgical Care Affiliates (NASDAQ: SCAI) and HealthSouth Corporation (NYSE:HLS) are both healthcare companies, but which is the better business? We will contrast the two companies based on the strength of their earnings, institutional ownership, profitability, dividends, analyst recommendations, risk and valuation.

Risk and Volatility

Surgical Care Affiliates has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500. Comparatively, HealthSouth Corporation has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Dividends

HealthSouth Corporation pays an annual dividend of $0.96 per share and has a dividend yield of 2.2%. Surgical Care Affiliates does not pay a dividend. HealthSouth Corporation pays out 35.3% of its earnings in the form of a dividend. Surgical Care Affiliates has raised its dividend for 3 consecutive years.

Profitability

This table compares Surgical Care Affiliates and HealthSouth Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Surgical Care Affiliates 21.52% 13.07% 12.83%
HealthSouth Corporation 6.70% 25.07% 5.51%

Analyst Ratings

This is a summary of recent ratings and target prices for Surgical Care Affiliates and HealthSouth Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Surgical Care Affiliates 0 2 0 0 2.00
HealthSouth Corporation 1 2 5 0 2.50

Surgical Care Affiliates currently has a consensus price target of $50.00, indicating a potential downside of 10.51%. HealthSouth Corporation has a consensus price target of $49.50, indicating a potential upside of 11.81%. Given HealthSouth Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe HealthSouth Corporation is more favorable than Surgical Care Affiliates.

Earnings & Valuation

This table compares Surgical Care Affiliates and HealthSouth Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Surgical Care Affiliates N/A N/A N/A $0.55 101.58
HealthSouth Corporation $3.77 billion 1.16 $817.10 million $2.72 16.28

HealthSouth Corporation has higher revenue and earnings than Surgical Care Affiliates. HealthSouth Corporation 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.

Institutional & Insider Ownership

93.1% of HealthSouth Corporation shares are owned by institutional investors. 3.3% of Surgical Care Affiliates shares are owned by insiders. Comparatively, 1.6% of HealthSouth Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Summary

HealthSouth Corporation beats Surgical Care Affiliates on 9 of the 14 factors compared between the two stocks.

About Surgical Care Affiliates

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.

About HealthSouth Corporation

HealthSouth Corporation (HealthSouth) is a provider of post-acute healthcare services, offering both facility-based and home-based post-acute services in 35 states and Puerto Rico through its network of inpatient rehabilitation hospitals, home health agencies and hospice agencies. The Company manages its operations through segments, including inpatient rehabilitation, and home health and hospice. It is an owner and operator of inpatient rehabilitation hospitals. It provides specialized rehabilitative treatment on both an inpatient and outpatient basis. It offers its home health and hospice services through Encompass Home Health and Hospice business (Encompass). Encompass operates home health and hospice agencies in 25 states, with concentrations in the Southeast, Oklahoma, and Texas. As of December 31, 2016, the Company operated 123 inpatient rehabilitation hospitals. As of December 31, 2016, the Company managed five inpatient rehabilitation units through management contracts.

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