r/valueinvesting
HCA - undervalued
HCA appears undervalued with a P/E of ~12; the market overreacted to international patient revenue fears which are minor relative to the price drop.
- The stock's recent price decline is disproportionate to the actual financial impact of losing international patient revenue.
- Trading at a low P/E ratio of approximately 12 suggests significant value relative to its high profitability.
- The company possesses a strong economic moat and a robust investment pipeline across multiple countries.
Hello,
Been looking at HCA. Big dip because of feared loss of international patients but the revenue from such patients is significantly less than the % of the dip. P/E around 12. Hugely profitable, big moat, good investment pipeline in multiple countries….
Where’s the downside? What am I missing?
I doubt anyone here is really familiar with this industry/company lol
I do. A couple friends work(ed). Terribly understaffed and poorly paid, for workers RN PA MDs. There were allegations they use “upcodiing” aka upcharging patients.
No way i will look into
Yeah the med industry is a big scam
I like it if it touches around $330
Ran $HCA through through a peer benchmarking tool . I see the data mostly backs your thesis, with one thing worth flagging. The moat is real. Operating margin is at the 82nd percentile among \~57 hospital peers, customer stickiness scores Strong (84/100), and FCF yield is sitting at 9.6% with FCF up 36% YoY. Hard to argue it's not a quality business. The one wrinkle: they're returning \~140% of free cash flow to shareholders (buybacks + dividends), funding the gap with debt. It's been their playbook for years so it's not exactly a surprise, but the liquidity position is thin - current ratio at the 22nd percentile vs peers. Fine in normal conditions, worth watching if credit tightens. Also the negative ROE looks alarming at first glance but it's just an accounting artifact from aggressive buybacks. ROIC is 23.4%, 91st percentile. That's the number that actually matters. So yeah, the international patient dip seems like an overreaction to me too. The business fundamentals are solid. The leverage structure is the thing I'd keep an eye on, not the headline risk.
Thank you. I did not consider the leverage structure in this way.
Which tool did you use for this?
stumbled across this tool called StatsAlpha a while back - what I like about it is it benchmarks against industry peers instead of the whole market, so the numbers actually mean something in context. makes it a lot easier to spot what's genuinely strong vs what just looks good on paper
🙏
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