Pediatrix Medical Group has followed the market’s trajectory closely. The stock is down 5.2% to $14.23 per share over the past six months while the S&P 500 has lost 2.2%. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Pediatrix Medical Group, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Do We Think Pediatrix Medical Group Will Underperform?

Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why MD doesn't excite us and a stock we'd rather own.

1. Same-Store Sales Falling Behind Peers

In addition to reported revenue, same-store sales are a useful data point for analyzing Specialized Medical & Nursing Services companies. This metric measures the change in sales at brick-and-mortar locations that have existed for at least a year, giving visibility into Pediatrix Medical Group’s underlying demand characteristics.

Over the last two years, Pediatrix Medical Group’s same-store sales averaged 3.9% year-on-year growth. This performance slightly lagged the sector and suggests it might have to change its strategy or pricing, which can disrupt operations.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Pediatrix Medical Group, its EPS declined by 1.8% annually over the last five years while its revenue grew by 2%. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Pediatrix Medical Group’s ROIC has decreased significantly over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

Pediatrix Medical Group doesn’t pass our quality test. After the recent drawdown, the stock trades at 9.2× forward P/E (or $14.23 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. Let us point you toward an all-weather company that owns household favorite Taco Bell.

Stocks We Would Buy Instead of Pediatrix Medical Group

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