National Healthcare Corp (NHC, Financial) has recently shown a notable daily gain of 11.23%, complemented by a 3-month gain of 29.53%. With an Earnings Per Share (EPS) of $2.91, investors are keen to determine if the stock is modestly overvalued as suggested by the GF Valuation. This article delves into the intrinsic value of National Healthcare, providing a valuation analysis to guide investors through the complexities of the stock market.
Company Introduction
National Healthcare Corp (NHC, Financial) operates a diversified healthcare business, including skilled nursing facilities, assisted living, and home care programs. With a current stock price of $86.3 and a market cap of $1.3 billion, there is a question of alignment with the GF Value, which estimates the fair value at $73.3. The following analysis aims to unravel the company's true market value by examining its financial and operational nuances.
Summarizing GF Value
The GF Value is a proprietary metric that reflects the intrinsic value of a stock, taking into account historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. National Healthcare's stock is currently considered modestly overvalued, and this assessment suggests that its long-term return may be lower than its business growth trajectory.
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Financial Strength
Investors must consider a company's financial strength to mitigate the risk of capital loss. National Healthcare's cash-to-debt ratio of 2.07 ranks well within its industry, reflecting a strong financial position with a score of 9 out of 10. This robust financial health is a crucial factor for investors to consider.
Profitability and Growth
Profitability is a key indicator of a company's performance and potential. National Healthcare has a consistent track record of profitability over the past decade. However, with operating margins trailing behind half of its industry peers, its profitability rank is deemed fair. When it comes to growth, National Healthcare's annual revenue growth rate and EBITDA growth rate are less impressive compared to industry standards, which could influence long-term valuation.
ROIC vs WACC
An insightful way to gauge profitability is by comparing a company's Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). For National Healthcare, the ROIC of 3.14 is currently below the WACC of 5.38, indicating that the company may not be creating value for shareholders as efficiently as possible.
Conclusion
In conclusion, National Healthcare appears to be modestly overvalued based on the GF Value. While the company exhibits strong financial health, its fair profitability and subpar growth metrics compared to industry peers warrant a cautious approach. Potential investors should further explore National Healthcare's 30-Year Financials here to make an informed decision.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
