Universal Health Services Inc (UHS, Financial) recently showcased a daily gain of 2.88% and an 8.45% increase over the past three months. With an Earnings Per Share (EPS) of 11.78, investors are keen to determine if the stock is fairly valued. This analysis delves into whether Universal Health Services stands as a prudent investment based on its current market performance and intrinsic value as calculated by the GF Value.
Company Overview
Universal Health Services operates a robust network including acute care hospitals, behavioral health centers, and ambulatory surgery centers. With a primary focus on Acute Care Hospital Services and Behavioral Health Services, the company has established a significant presence in the healthcare sector. As of the latest data, Universal Health Services boasts a market cap of $12.10 billion and sales amounting to $14.70 billion, reflecting its substantial scale and operational scope.
Understanding the GF Value
The GF Value is a unique valuation metric that suggests the fair value of a stock based on historical trading multiples, an adjustment factor from GuruFocus reflecting past performance, and future business expectations. For Universal Health Services, the GF Value is set at $173.25, indicating that the stock, with its current price of $180.23, is fairly valued. This assessment implies that the stock price aligns closely with the company's intrinsic value, suggesting minimal overvaluation or undervaluation at this juncture.
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Financial Strength and Risks
Assessing the financial strength of Universal Health Services is crucial to understanding its risk profile. The company's cash-to-debt ratio stands at 0.02, which is lower than 92.44% of its peers in the Healthcare Providers & Services industry. This metric, along with a fair overall financial strength rating of 6 out of 10, suggests that while Universal Health Services maintains a decent financial posture, potential investors should be mindful of its debt levels.
Profitability and Growth Prospects
Universal Health Services has demonstrated strong profitability, with a 10-year track record of consistent earnings. The company's operating margin of 8.77% ranks better than 66.67% of its industry counterparts. However, its growth metrics indicate challenges, with a 3-year average EBITDA growth rate of 3.8%, placing it below 65.13% of industry peers. These figures highlight the mixed financial dynamics at play, underscoring the importance of balanced investment consideration.
ROIC vs. WACC: Value Creation Analysis
Comparing the Return on Invested Capital (ROIC) of 8.27% against the Weighted Average Cost of Capital (WACC) of 9.61% reveals that Universal Health Services is currently not generating excess returns on its investments, which could be a concern for value creation in the long term.
Final Thoughts
In conclusion, while Universal Health Services (UHS, Financial) appears to be fairly valued according to the GF Value, the company's financial health and profitability present a balanced risk-reward scenario. Potential investors should weigh these factors carefully and consider the long-term implications of the company's financial strategies and market position.
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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.
