What If You Were Missing The Value In HCA Stock?
Here is why we think HCA Healthcare (HCA) deserves consideration as a value stock.
- Reasonable Growth: 7.3% LTM and 6.3% last 3 year average.
- Cash Generative: Nearly 6.9% free cash flow margin and 15.1% operating margin LTM.
- No Major Shocks: HCA has avoided any large revenue collapses.
- Modest Valuation: Despite encouraging fundamentals, HCA trades at a PE multiple of 16.4
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher growth, and lower margins
| HCA | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Health Care Facilities | – |
| PE Ratio | 16.4 | 23.8 |
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| LTM* Revenue Growth | 7.3% | 5.0% |
| 3Y Average Annual Revenue Growth | 6.3% | 5.9% |
| Min Annual Revenue Growth Last 3Y | 1.9% | -0.4% |
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| LTM* Operating Margin | 15.1% | 18.8% |
| 3Y Average Operating Margin | 15.0% | 17.5% |
| LTM* Free Cash Flow Margin | 6.9% | 13.0% |
*LTM: Last Twelve Months
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
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For 65 similar value stocks chosen as of mid 2024, consider the following stats for the subsequent 1 year period.
- Average peak return of 39.3% vs 14.4% for S&P, with maximum peak return of 133%
- Win rate of 60%; win rate represents % of stocks with positive return
- Average 1-year return of 14.6%, similar to S&P’s despite tariff instability
But Consider The Risk
That said, HCA isn’t immune to big dips. It lost about 23% during the 2018 correction, dropped over 54% in the Covid pandemic sell-off, and fell nearly 40% in the inflation shock. Even with solid fundamentals, these pullbacks show the stock can swing hard when markets turn sour. Good business won’t stop sharp drops when risk is high.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.