Investment Thesis
Surgery Partners operates with positive operating income ($65.8M, 8.1% margin) but is unprofitable at the net level (-$35.9M) due to substantial debt burden ($3.6B, 2.14x D/E). The company's inability to generate positive free cash flow (-$4.3M) despite $810.9M revenue, combined with negative returns to shareholders (ROE -2.1%, ROA -0.4%), indicates structural financial stress that outweighs modest 6.2% revenue growth.
Strengths
- Positive operating income of $65.8M with 8.1% operating margin demonstrates core business capability
- Revenue growth of 6.2% YoY shows market demand for healthcare services
- Adequate short-term liquidity with current ratio of 1.86x and quick ratio of 1.69x
Risks
- Negative free cash flow (-$4.3M) with weak operating cash flow ($11.7M) relative to $810.9M revenue indicates poor cash generation
- High leverage (Debt/Equity 2.14x, $3.6B long-term debt) with significant interest burden crushing net profitability
- Negative net income (-$35.9M, -4.4% margin) and negative returns (ROE -2.1%, ROA -0.4%) destroying shareholder value
- Large gap between $65.8M operating income and -$35.9M net income suggests unsustainable debt servicing costs
- Capital expenditure ($16.0M) exceeds operating cash flow ($11.7M), requiring debt or external funding
Key Metrics to Watch
- Free cash flow trajectory and ability to achieve positive FCF
- Debt reduction progress and Debt/Equity ratio improvement
- Operating cash flow as percentage of revenue
- Interest expense and debt refinancing terms
- Net income path to profitability and timeline
Financial Metrics
Revenue
810.9M
Net Income
-35.9M
EPS (Diluted)
$-0.28
Free Cash Flow
-4.3M
Total Assets
8.0B
Cash
182.3M
Profitability Ratios
Gross Margin
N/A
Operating Margin
8.1%
Net Margin
-4.4%
ROE
-2.1%
ROA
-0.4%
FCF Margin
-0.5%
Balance Sheet & Liquidity
Current Ratio
1.86x
Quick Ratio
1.69x
Debt/Equity
2.14x
Debt/Assets
0.0%
Interest Coverage
N/A
Long-term Debt
3.6B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-07T10:30:20.868206 |
Data as of: 2026-03-31 |
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