Is Market Overlooking HCA Right Now?
Here is why we think HCA Healthcare (HCA) deserves consideration as a value stock.
- Reasonable Revenue Growth: 6.4% LTM and 6.6% last 3 year average.
- Cash Generative: Nearly 10.0% free cash flow margin and 15.2% operating margin LTM.
- No Major Shocks: HCA has avoided any revenue collapses in the last 3 years.
- Modest Valuation: Despite encouraging fundamentals, HCA trades at a PE multiple of 16.9
- Opportunity vs S&P: Compared to S&P, you get lower valuation, higher revenue growth, but lower margins
As a quick background, HCA Healthcare provides comprehensive healthcare services across 182 U.S. hospitals, including general, psychiatric, and rehabilitation care, specializing in inpatient, intensive, cardiac, diagnostic, and emergency services.
| HCA | S&P Median | |
|---|---|---|
| Sector | Health Care | – |
| Industry | Health Care Facilities | – |
| PE Ratio | 16.9 | 23.8 |
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| LTM* Revenue Growth | 6.4% | 5.1% |
| 3Y Average Annual Revenue Growth | 6.6% | 5.3% |
| Min Annual Revenue Growth Last 3Y | 3.0% | -0.1% |
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| LTM* Operating Margin | 15.2% | 18.6% |
| 3Y Average Operating Margin | 15.0% | 17.8% |
| LTM* Free Cash Flow Margin | 10.0% | 13.3% |
*LTM: Last Twelve Months
But do these numbers tell the full story? Read Buy or Sell HCA Stock to see if HCA Healthcare still has an edge that holds up under the hood.
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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
Stocks Like These Can Outperform. Here Is Data
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.
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read HCA Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. 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.