We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
UHS or THC: Which Stock is Better-Placed at the Moment?
Read MoreHide Full Article
The U.S. hospital industry seems to be on a gradual path of recovery following a dismal period in 2020 when several industry participants had to suspend non-emergency procedures in a bid to address the spike in coronavirus cases. From a broader perspective, it is imperative to mention that the global economy is slowly coming out of the woods driven by the gradual resumption of business activities, massive pandemic-relief packages distributed by governments and ramped-up vaccination programs worldwide.
The hospital industry seems to be reaping the benefits of a recovering global economy, which is resulting in a turnaround in hospital revenues. Revenues are improving on the back of rebounding patient volumes. Individuals feel more confident about hospital visits after getting vaccinated. Hospitals can complete the numerous procedures that were put on hold due to the pandemic-inflicted volatilities.
Additionally, the Centers for Disease Control and Prevention (CDC) remains proactive in issuing guidelines to curb the spread of the highly transmissible Omicron variant. Necessary precautions can effectively minimize the huge pressure on healthcare systems, which has been occurring each time with the advent of a new COVID variant.
Apart from rise in admissions, there are other factors that are anticipated to continue acting as tailwinds for the hospital space in 2022. Intensified focus on mergers and acquisitions (M&A) and continuous technological advancements are likely to sustain the competitive edge of hospital stocks. A recovering economy has enhanced the spending capabilities of the hospital stocks. Per a BTI Consulting Group report, M&A activity is anticipated to increase and remain at peak levels in 2022. With such growth-related activities, hospitals can add facilities and beds to their existing network, boost business scale, expand geographical presence and bring about diversification benefits.
Investments in technology play a vital role in strengthening one’s market position these days and the hospital industry is no exception to the trend. With these developments, the hospital industry devises virtual solutions through which patients can avail medical consultations from home. These services, popularly known as telehealth facilities, have not only resulted in substantial cost savings but also provided a boost to the hospital’s margins.
The prevailing scenario makes us optimistic regarding consistent growth in the hospital industry, which should bolster the prospects of companies with sound business fundamentals.
The Zacks Hospital Industry has gained 41.3% in the past year against the Medical sector’s decline of 7%. The S&P Index rallied 29.6% in the same time frame.
Image Source: Zacks Investment Research
Against this backdrop, let’s take a look at the two hospital stocks Universal Health Services, Inc. (UHS - Free Report) and Tenet Healthcare Corporation (THC - Free Report) with market capitalizations of $10.4 billion and $8.8 billion, respectively. Both stocks carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let's delve deeper into specific parameters and try to ascertain the better stock of the two.
Price Performance
Shares of Tenet Healthcare soared 109.5% in a year compared with the industry’s rally of 41.3%. Meanwhile, Universal Health stock has lost 4.2% in the same time frame. Evidently, THC has the edge over UHS here.
Image Source: Zacks Investment Research
Earnings Surprise History
A stock’s earnings surprise track helps investors get an idea about its performance in the previous quarters.
Universal Health’s bottom line beat estimates in three of the trailing four quarters and missed once. It has a trailing four-quarter earnings surprise of 17.64%, on average. Meanwhile, earnings of Tenet Healthcare surpassed the mark in each of the trailing four quarters. It has a trailing four-quarter earnings surprise of 58.19%, on average. It is clear that THC has a better reading than UHS here.
Return on Equity
Return on equity is a profitability measure, which indicates how efficiently the company is utilizing its shareholders' funds.
Tenet Healthcare’s ROE of 58.5% compares favorably with Universal Health’s ROE of 16.4%.
Debt-to-Equity
Both companies have a lower debt-to-equity ratio than the industry average. The lower the ratio, the better it is for the company as it implies a sound solvency level. UHS’s leverage ratio of 59X betters THC’s ratio of 864.5X. Therefore, Universal Health holds an edge over Tenet Healthcare on this front.
Dividend History
Universal Health has been implementing dividend hikes regularly with dividend yield being 0.6%. However, Tenet Healthcare did not resort to any dividend payments since 1993. This round belongs to UHS.
Growth Projection
The expected long-term earnings growth rate of both stocks is lower than the industry’s average of 9.8%. But the metric for Universal Health is pegged at 6.5%, which appears better than Tenet Healthcare’s figure of 1.5%. Consequently, UHS is the clear winner here.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth and the most promising momentum. Both Universal Health and Tenet Healthcare have an impressive VGM Score, faring equally on this front.
Admissions
Undoubtedly, one of the major metrics that boosts a hospital’s revenues is its admission figures. Total admissions reported by Universal Health were 0.6 million for the first nine months of 2021, while the metric for Tenet Healthcare totaled 0.4 million in the same time frame. Hence, UHS wins this round.
Conclusion
Our comparative analysis shows that Universal Health is better-placed than Tenet Healthcare with respect to the leverage ratio, dividend history, expected long-term earnings growth and admission figures. Meanwhile, Tenet Healthcare scores higher in terms of price performance, earnings surprise and return on equity. With the scale tilted marginally toward Universal Health, the stock definitely appears to be better poised.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
UHS or THC: Which Stock is Better-Placed at the Moment?
The U.S. hospital industry seems to be on a gradual path of recovery following a dismal period in 2020 when several industry participants had to suspend non-emergency procedures in a bid to address the spike in coronavirus cases. From a broader perspective, it is imperative to mention that the global economy is slowly coming out of the woods driven by the gradual resumption of business activities, massive pandemic-relief packages distributed by governments and ramped-up vaccination programs worldwide.
The hospital industry seems to be reaping the benefits of a recovering global economy, which is resulting in a turnaround in hospital revenues. Revenues are improving on the back of rebounding patient volumes. Individuals feel more confident about hospital visits after getting vaccinated. Hospitals can complete the numerous procedures that were put on hold due to the pandemic-inflicted volatilities.
Additionally, the Centers for Disease Control and Prevention (CDC) remains proactive in issuing guidelines to curb the spread of the highly transmissible Omicron variant. Necessary precautions can effectively minimize the huge pressure on healthcare systems, which has been occurring each time with the advent of a new COVID variant.
Apart from rise in admissions, there are other factors that are anticipated to continue acting as tailwinds for the hospital space in 2022. Intensified focus on mergers and acquisitions (M&A) and continuous technological advancements are likely to sustain the competitive edge of hospital stocks. A recovering economy has enhanced the spending capabilities of the hospital stocks. Per a BTI Consulting Group report, M&A activity is anticipated to increase and remain at peak levels in 2022. With such growth-related activities, hospitals can add facilities and beds to their existing network, boost business scale, expand geographical presence and bring about diversification benefits.
Investments in technology play a vital role in strengthening one’s market position these days and the hospital industry is no exception to the trend. With these developments, the hospital industry devises virtual solutions through which patients can avail medical consultations from home. These services, popularly known as telehealth facilities, have not only resulted in substantial cost savings but also provided a boost to the hospital’s margins.
The prevailing scenario makes us optimistic regarding consistent growth in the hospital industry, which should bolster the prospects of companies with sound business fundamentals.
The Zacks Hospital Industry has gained 41.3% in the past year against the Medical sector’s decline of 7%. The S&P Index rallied 29.6% in the same time frame.
Against this backdrop, let’s take a look at the two hospital stocks Universal Health Services, Inc. (UHS - Free Report) and Tenet Healthcare Corporation (THC - Free Report) with market capitalizations of $10.4 billion and $8.8 billion, respectively. Both stocks carry a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let's delve deeper into specific parameters and try to ascertain the better stock of the two.
Price Performance
Shares of Tenet Healthcare soared 109.5% in a year compared with the industry’s rally of 41.3%. Meanwhile, Universal Health stock has lost 4.2% in the same time frame. Evidently, THC has the edge over UHS here.
Earnings Surprise History
A stock’s earnings surprise track helps investors get an idea about its performance in the previous quarters.
Universal Health’s bottom line beat estimates in three of the trailing four quarters and missed once. It has a trailing four-quarter earnings surprise of 17.64%, on average. Meanwhile, earnings of Tenet Healthcare surpassed the mark in each of the trailing four quarters. It has a trailing four-quarter earnings surprise of 58.19%, on average. It is clear that THC has a better reading than UHS here.
Return on Equity
Return on equity is a profitability measure, which indicates how efficiently the company is utilizing its shareholders' funds.
Tenet Healthcare’s ROE of 58.5% compares favorably with Universal Health’s ROE of 16.4%.
Debt-to-Equity
Both companies have a lower debt-to-equity ratio than the industry average. The lower the ratio, the better it is for the company as it implies a sound solvency level. UHS’s leverage ratio of 59X betters THC’s ratio of 864.5X. Therefore, Universal Health holds an edge over Tenet Healthcare on this front.
Dividend History
Universal Health has been implementing dividend hikes regularly with dividend yield being 0.6%. However, Tenet Healthcare did not resort to any dividend payments since 1993. This round belongs to UHS.
Growth Projection
The expected long-term earnings growth rate of both stocks is lower than the industry’s average of 9.8%. But the metric for Universal Health is pegged at 6.5%, which appears better than Tenet Healthcare’s figure of 1.5%. Consequently, UHS is the clear winner here.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth and the most promising momentum. Both Universal Health and Tenet Healthcare have an impressive VGM Score, faring equally on this front.
Admissions
Undoubtedly, one of the major metrics that boosts a hospital’s revenues is its admission figures. Total admissions reported by Universal Health were 0.6 million for the first nine months of 2021, while the metric for Tenet Healthcare totaled 0.4 million in the same time frame. Hence, UHS wins this round.
Conclusion
Our comparative analysis shows that Universal Health is better-placed than Tenet Healthcare with respect to the leverage ratio, dividend history, expected long-term earnings growth and admission figures. Meanwhile, Tenet Healthcare scores higher in terms of price performance, earnings surprise and return on equity. With the scale tilted marginally toward Universal Health, the stock definitely appears to be better poised.