Why Is HCA With Its High Cash Flow Yield Not on Your Watchlist?
Here is why we think HCA Healthcare (HCA) is worth a look.
- Cash Yield: Not many stocks offer free cash flow yield of 7.2%, but HCA does
- Fundamentals: 3-Year average revenue growth of 6.6% and operating margin of 15.0% show reasonable fundamentals
- Valuation: Stock currently trading at 0.03% below 2Y high, 0.03% below 1M high, and at a PS lower than 3Y average.
Free Cash Flow Yield refers to free cash flow per share / stock price. Why it matters? If a company produces high amount of cash per share, it can be used to fuel additional revenue growth, or simply paid through dividends or buybacks to shareholders. For 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 | – |
| Free Cash Flow Yield | 7.2% | 3.9% |
| Revenue Growth LTM | 6.4% | 5.2% |
| Revenue Growth 3YAVG | 6.6% | 5.3% |
| Operating Margin LTM | 15.2% | 18.6% |
| Operating Margin 3YAVG | 15.0% | 17.8% |
| LTM Operating Margin Change | 0.3% | 0.3% |
| PE Ratio | 17.1 | 23.9 |
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.
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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The Point? The Market Can Notice, And Reward
The below statistics are from high FCF yield selection strategy between 12/31/2016 and 6/30/2025. The stats are calculated based on selections made monthly, and assuming that a stock once picked, can not be re-picked for next 180 days.
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Not over dependent on market crashes. During non-crash periods as well, this strategy has 12-month average return of nearly 18% with 70% win rate.
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.
Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, 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.