With a daily loss of -1.52%, a 3-month loss of -17.33%, and an Earnings Per Share (EPS) of 20.33, HCA Healthcare Inc (HCA, Financial) seems to be modestly undervalued. But is it really? This article aims to answer that question through a detailed valuation analysis. Read on to uncover the true worth of HCA Healthcare.
Company Introduction
HCA Healthcare is a Nashville-based healthcare provider, operating the largest collection of acute-care hospitals in the United States. As of December 2022, the firm owned and operated 182 hospitals, 126 freestanding outpatient surgery centers, and a broad network of physician offices, urgent-care clinics, and freestanding emergency rooms across 20 states and England. With a current stock price of $246.85 and a fair value (GF Value) of $285.51, HCA Healthcare appears to be modestly undervalued. But to understand the company's true value, we need to delve deeper into its financials and operations.
Understanding GF Value
The GF Value represents the intrinsic value of a stock derived from GuruFocus's exclusive method. It is calculated based on three factors: historical multiples, GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance. The GF Value Line indicates the fair value at which the stock should ideally trade. If the stock price significantly deviates from the GF Value Line, it may indicate that the stock is overvalued or undervalued.
According to this method, HCA Healthcare's stock appears to be modestly undervalued, indicating that the long-term return of its stock is likely to be higher than its business growth.
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Assessing Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. It's crucial to review a company's financial strength before deciding to purchase shares. HCA Healthcare has a cash-to-debt ratio of 0.02, ranking worse than 94.36% of 656 companies in the Healthcare Providers & Services industry. This indicates that the financial strength of HCA Healthcare is poor.
Profitability and Growth
Investing in profitable companies carries less risk. HCA Healthcare has been profitable for 10 years over the past 10 years, with revenues of $61.90 billion and an Earnings Per Share (EPS) of $20.33 in the past 12 months. Its operating margin of 15% is better than 82.75% of 661 companies in the Healthcare Providers & Services industry. Overall, HCA Healthcare's profitability is strong.
Growth is a crucial factor in the valuation of a company. HCA Healthcare's 3-year average annual revenue growth rate is11.5%, which ranks better than 58.04% of 572 companies in the Healthcare Providers & Services industry. The 3-year average EBITDA growth rate is 17.6%, which ranks better than 62.76% of 521 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. HCA Healthcare's ROIC is 17.36 while its WACC is 10.4, indicating that the company is creating value for its shareholders.
Conclusion
Overall, HCA Healthcare's stock appears to be modestly undervalued. The company's financial condition is poor, but its profitability is strong. Its growth ranks better than 62.76% of 521 companies in the Healthcare Providers & Services industry. To learn more about HCA Healthcare stock, you can check out its 30-Year Financials here.
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