Surgery Partners (SGRY): A Hidden Gem in the Outpatient Care Revolution

The shift toward outpatient care is reshaping healthcare, and Surgery Partners (SGRY) stands at the intersection of this secular trend, yet its stock remains undervalued despite robust operational momentum. With Q1 2025 results validating its growth trajectory and a liquidity-rich balance sheet enabling strategic acquisitions, SGRY is primed for upside as the market catches up to its intrinsic value. Let’s dissect why this outpatient surgery leader is a compelling buy for 2025.

Q1 2025: Operational Resilience Amid Sector-Wide Challenges

Surgery Partners reported first-quarter revenue of $776 million, a 8.2% year-over-year increase, driven by 5.2% same-facility revenue growth and a 6.5% rise in surgical cases. While peers like HCA Healthcare (HCA) and Tenet Healthcare (THC) have seen outpatient revenue growth in the 10-18% range, SGRY’s metrics are equally impressive when contextualized against its larger scale and higher base of operations. The company’s same-facility surgical case volume growth of 6.5% outperformed its own 2024 full-year case growth of 3.9%, signaling scalability in its core model.

Crucially, this growth wasn’t just about volume. SGRY’s Adjusted EBITDA rose 6.6% to $103.9 million, a key validation of its margin expansion strategy. Even though the net loss widened to $37.7 million due to non-cash tax charges and elevated interest expenses, operational cash flow remains strong, underpinning its ability to navigate short-term noise.

2025 Guidance: Outperformance Anchored in Margin Growth

SGRY reaffirmed its full-year 2025 revenue guidance of $3.30 billion to $3.45 billion (+7-9% growth) and Adjusted EBITDA targets of $555 million to $565 million (+9-11%), which are achievable given its first-quarter performance. Analysts estimate a $31.36 price target—a 58% upside from current levels—assuming the company meets its high end of guidance.

The margin expansion story is critical here. SGRY’s Q1 Adjusted EBITDA margin held steady at 13.4%, despite headwinds like rising labor costs. Management attributes this resilience to:
1. Portfolio optimization: Closing underperforming facilities and focusing on high-margin ASCs.
2. Acquisition synergies: Integrating 2024’s $400 million in deals, including Texas ASCs, which are already contributing to scalability.
3. De novo facilities: New centers in high-growth markets will add incremental EBITDA over the next two years.

Liquidity: A Weapon to Outpace Peers in M&A

With $229 million in cash and $388 million in borrowing capacity as of March 2025, SGRY’s $617 million liquidity cushion (plus $153 million in untapped credit facilities from prior reports) dwarfs its peers’ constrained capital positions. While HCA and THC face debt overhangs, SGRY’s debt-to-EBITDA ratio of 4.1x is manageable and declining. This liquidity allows SGRY to:
- Aggressively pursue accretive acquisitions: The company plans to deploy up to $400 million in 2025, targeting ASCs in underserved markets.
- Avoid equity dilution: Unlike smaller players, SGRY can grow organically without issuing shares, preserving shareholder value.

Why SGRY’s Stock Lag Is a Buying Opportunity

The stock trades at just 3.8x 2025E EBITDA, a discount to peers trading at 5-6x. This undervaluation stems from two factors:
1. Short-term EPS volatility: Non-cash charges and interest costs cloud the net income picture, but cash flow and Adjusted EBITDA are the true metrics of SGRY’s health.
2. Market skepticism on outpatient tailwinds: Investors underappreciate how SGRY’s ASC network—which costs $1,600 per case vs. $10,000 in hospitals—will benefit from CMS’s push to shift surgeries outpatient.

Conclusion: Buy SGRY for 2025 Upside

Surgery Partners is a hidden growth engine in outpatient care. Its Q1 results and reaffirmed guidance confirm that margin expansion and M&A-fueled scalability are on track. With liquidity to outpace peers and a price target implying 58% upside, SGRY is a rare value play in a sector undergoing rapid change.

Actionable thesis:
- Buy SGRY at $22.15, targeting $31.36 by year-end.
- Hold for 12-18 months to capture margin upside and M&A catalysts.

The outpatient revolution isn’t slowing—neither should SGRY’s stock.