U.S. Physical Therapy (USPH)

Outpatient physical therapy provider U.S. Physical Therapy (NYSE:USPH) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 17.3% year on year to $197.1 million. Its non-GAAP profit of $0.66 per share was in line with analysts’ consensus estimates.

Company Overview

With a nationwide footprint spanning 671 clinics across 42 states, U.S. Physical Therapy (NYSE:USPH) operates a network of outpatient physical therapy clinics and provides industrial injury prevention services to employers across the United States.

The outpatient and specialty care industry delivers targeted medical services in non-hospital settings that are often cost-effective compared to inpatient alternatives. This means that they are more desired as rising healthcare costs and ways to combat them become more and more top-of-mind. Outpatient and specialty care providers boast revenue streams that are stable due to the recurring nature of treatment for chronic conditions and long-term patient relationships. However, their reliance on government reimbursement programs like Medicare means stroke-of-the-pen risk. Additionally, scaling a network of facilities can be capital-intensive with uneven return profiles amid competition from integrated healthcare systems. Looking ahead, the industry is positioned to grow as demand for outpatient services expands, driven by aging populations, a rising prevalence of chronic diseases, and a shift toward value-based care models. Tailwinds include advancements in medical technology that support more complex procedures in outpatient settings and the increasing focus on preventive care, which can be aided by data and AI. However, headwinds such as reimbursement rate cuts, labor shortages, and the financial strain of digitization may temper growth.

U.S. Physical Therapy's competitors include Select Medical Holdings (NYSE:SEM), ATI Physical Therapy (NYSE:ATIP), and Athletico Physical Therapy (privately held), along with numerous regional physical therapy chains and independent clinics.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With just $758.7 million in revenue over the past 12 months, U.S. Physical Therapy is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, U.S. Physical Therapy’s sales grew at a solid 12.2% compounded annual growth rate over the last five years. Its growth beat the average healthcare company and shows its offerings resonate with customers.

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. U.S. Physical Therapy’s annualized revenue growth of 13.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

We can dig further into the company’s revenue dynamics by analyzing its number of patient visits, which reached 1.55 million in the latest quarter. Over the last two years, U.S. Physical Therapy’s patient visits averaged 10.8% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, U.S. Physical Therapy reported year-on-year revenue growth of 17.3%, and its $197.1 million of revenue exceeded Wall Street’s estimates by 1.2%.

Looking ahead, sell-side analysts expect revenue to grow 6.5% over the next 12 months, a deceleration versus the last two years. Still, this projection is above average for the sector and suggests the market is baking in some success for its newer products and services.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

U.S. Physical Therapy has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 11%, higher than the broader healthcare sector.

Looking at the trend in its profitability, U.S. Physical Therapy’s operating margin decreased by 3.9 percentage points over the last five years, but it rose by 1 percentage points on a two-year basis. Still, shareholders will want to see U.S. Physical Therapy become more profitable in the future.

This quarter, U.S. Physical Therapy generated an operating margin profit margin of 12.8%, up 4.1 percentage points year on year. This increase was a welcome development and shows it was more efficient.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

U.S. Physical Therapy’s EPS grew at an unimpressive 2.5% compounded annual growth rate over the last five years, lower than its 12.2% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

We can take a deeper look into U.S. Physical Therapy’s earnings to better understand the drivers of its performance. As we mentioned earlier, U.S. Physical Therapy’s operating margin expanded this quarter but declined by 3.9 percentage points over the last five years. Its share count also grew by 18.3%, meaning the company not only became less efficient with its operating expenses but also diluted its shareholders.

In Q3, U.S. Physical Therapy reported adjusted EPS of $0.66, down from $0.69 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects U.S. Physical Therapy’s full-year EPS of $2.46 to grow 16.2%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

U.S. Physical Therapy has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 10.6% over the last five years, better than the broader healthcare sector.

Taking a step back, we can see that U.S. Physical Therapy’s margin dropped by 8.6 percentage points during that time. If its declines continue, it could signal increasing investment needs and capital intensity.

U.S. Physical Therapy’s free cash flow clocked in at $15.63 million in Q3, equivalent to a 7.9% margin. The company’s cash profitability regressed as it was 3.7 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although U.S. Physical Therapy hasn’t been the highest-quality company lately, it historically found a few growth initiatives that worked. Its five-year average ROIC was 11.1%, higher than most healthcare businesses.

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, U.S. Physical Therapy’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

U.S. Physical Therapy reported $31.1 million of cash and $281.3 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $92.06 million of EBITDA over the last 12 months, we view U.S. Physical Therapy’s 2.7× net-debt-to-EBITDA ratio as safe. We also see its $4.02 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see U.S. Physical Therapy narrowly top analysts’ revenue expectations this quarter. Overall, this print had some key positives. The stock remained flat at $88.05 immediately following the results.

Updated: December 4, 2025 at 10:56 PM EST

Before making an investment decision, investors should account for U.S. Physical Therapy’s business fundamentals and valuation in addition to what happened in the latest quarter.

U.S. Physical Therapy isn’t a terrible business, but it isn’t one of our picks. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its subscale operations give it fewer distribution channels than its larger rivals. And while the company’s growth in patient visits was solid, the downside is its diminishing returns show management's prior bets haven't worked out.

U.S. Physical Therapy’s P/E ratio based on the next 12 months is 26.7x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $105.33 on the company (compared to the current share price of $76.30).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.