Cash Machine Trading Cheap – Surgery Partners Stock Set to Run?

We think Surgery Partners (SGRY) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market.

What Is Happening With SGRY

SGRY stock is available at a significant discount to its 3-month, 1-year, and 2-year highs. This can be attributed to softer-than-anticipated commercial patient volumes and delays in capital deployment during 2025. Further contributing were earnings reductions from recent ASC divestitures and slower ramps for newly opened facilities.

Here is what’s going well for the company: Same-facility surgical cases grew 3.4% with revenue per case up 2.8% in Q3 2025, notably from a 16% increase in total joint surgeries. The company is expanding its high-acuity outpatient footprint with new facilities and 500 new physicians. Operating cash flow was $83.6 million in Q3, aided by supply cost efficiencies. Net debt to EBITDA was approximately 4.2x. Full-year 2025 revenue guidance was adjusted to $3.275 billion to $3.30 billion, reflecting caution on payer mix and volumes.

SGRY Has Strong Fundamentals

• Cash Yield: Surgery Partners offers an impressive cash flow yield of 10.0%.
• Growing: Revenue growth of 10.1% over the last twelve months means that the cash pile is going to grow.
• Valuation Discount: SGRY stock is currently trading at 33% below its 3-month high, 41% below its 1-year high, and 56% below its 2-year high.

Below is a quick comparison of SGRY fundamentals with S&P medians.

*LTM: Last Twelve Months

But What About The Risk Involved?

While SGRY stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. SGRY fell about 77% in the 2018 correction, just shy of a 76% drop during the Covid pandemic, and took a 67% hit in the inflation shock. These aren’t small dips by any measure. Even with all the positives around this stock, the downside risk during major market sell-offs is pretty clear. Good fundamentals matter, but when the market turns sharply, big losses happen here too. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read SGRY Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

Other Stocks Like SGRY

Not ready to act on SGRY? You could consider these alternatives:

1. Oracle (ORCL)
2. ServiceNow (NOW)
3. Dell Technologies (DELL)

We chose these stocks using the following criteria:

1. Greater than $2 Bil in market cap
2. Positive revenue growth
3. High free cash flow yield
4. Meaningful discount to 3M, 1Y, and 2Y highs

A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:

• Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
• Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods

Stock Picking Falls Short Against Multi Asset Portfolios

Individual picks are volatile but diversified assets offset each other. A multi asset portfolio helps you stay the course capture upside and reduce downside.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices