Healthways (NASDAQ: TVTY) and Surgery Partners (NASDAQ:SGRY) are both small-cap medical companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, dividends, earnings and risk.
Profitability
This table compares Healthways and Surgery Partners’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Healthways | 17.30% | 29.81% | 10.02% |
| Surgery Partners | 0.63% | 6.02% | 0.81% |
Insider and Institutional Ownership
38.4% of Surgery Partners shares are held by institutional investors. 8.4% of Healthways shares are held by insiders. Comparatively, 7.5% of Surgery Partners shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.
Analyst Recommendations
This is a breakdown of recent recommendations and price targets for Healthways and Surgery Partners, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Healthways | 0 | 1 | 5 | 0 | 2.83 |
| Surgery Partners | 1 | 1 | 4 | 0 | 2.50 |
Healthways presently has a consensus price target of $37.50, suggesting a potential upside of 4.60%. Surgery Partners has a consensus price target of $20.40, suggesting a potential upside of 119.35%. Given Surgery Partners’ higher probable upside, analysts plainly believe Surgery Partners is more favorable than Healthways.
Earnings and Valuation
This table compares Healthways and Surgery Partners’ revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| Healthways | $529.87 million | 2.66 | $115.05 million | $2.32 | 15.45 |
| Surgery Partners | $1.13 billion | 0.40 | $231.39 million | $0.15 | 62.00 |
Surgery Partners has higher revenue and earnings than Healthways. Healthways is trading at a lower price-to-earnings ratio than Surgery Partners, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
Healthways has a beta of 0.37, suggesting that its stock price is 63% less volatile than the S&P 500. Comparatively, Surgery Partners has a beta of 1.71, suggesting that its stock price is 71% more volatile than the S&P 500.
Summary
Healthways beats Surgery Partners on 8 of the 14 factors compared between the two stocks.
About Healthways
Tivity Health, Inc., formerly Healthways, Inc., is focused targeted population health for those aged 50 and older. The Company offers three programs: SilverSneakers senior fitness, Prime fitness and WholeHealth Living. The SilverSneakers senior fitness program is offered to members of Medicare Advantage, Medicare Supplement, and Group Retiree plans. The Company also offers Prime fitness, a fitness facility access program, through commercial health plans, employers and insurance exchanges. Its national network of fitness centers delivers both SilverSneakers and Prime fitness. As of December 31, 2016, the Company’s fitness networks encompassed approximately 16,000 participating locations and more than 1,000 alternative locations that provide classes outside of traditional fitness centers. As of December 31, 2016, the Company’s WholeHealth Living network included over 88,000 complementary, alternative, and physical medicine practitioners to serve individuals through health plans.
About Surgery Partners
Surgery Partners, Inc. is a healthcare services company. The Company operates in three lines of business across the United States: Surgical Facility Services, Ancillary Services and Optical Services. The Company’s Surgical Facility Services segment consists of the operation of ambulatory surgery centers (ASCs) and surgical hospitals, which include its anesthesia services. The Company’s surgical facilities primarily provide non-emergency surgical procedures across a range of specialties, which include gastrointestinal (GI), general surgery, ophthalmology, orthopedics and pain management. The Company’s Ancillary Services segment consists of a diagnostic laboratory, a specialty pharmacy and multi-specialty physician practices. The Company’s physician practices include its owned and operated physician practices pursuant to long-term management service agreements. The Company’s Optical Services segment consists of an optical laboratory, an optical products group purchasing organization.
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