With a daily loss of 5.13%, a 3-month decline of 25.2%, and an Earnings Per Share (EPS) of 4.55, Tenet Healthcare Corp (THC, Financial) appears to be modestly undervalued. This article aims to explore the intrinsic value of Tenet Healthcare (THC) based on the GF Value, a proprietary measure developed by GuruFocus. Read on as we delve into the financial health, profitability, and growth prospects of Tenet Healthcare.
A Brief Overview of Tenet Healthcare
Tenet Healthcare is a Dallas-based healthcare services organization. As of June 2023, it operates about 60 hospitals and over 550 ambulatory surgery centers and other outpatient facilities, primarily in the South. Through its Conifer segment, Tenet Healthcare also provides revenue cycle management solutions. The company's current stock price stands at $58.8, while the GF Value, an estimation of fair value, is $68.37. This discrepancy suggests that Tenet Healthcare's stock might be modestly undervalued.
Understanding the GF Value
The GF Value is a unique measure that estimates the intrinsic value of a stock. It considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to the GF Value calculation, Tenet Healthcare's stock appears to be modestly undervalued. With a current price of $58.8 per share and a market cap of $6 billion, the stock's long-term return is likely to be higher than its business growth because it is relatively undervalued.
Financial Strength of Tenet Healthcare
Investing in companies with poor financial strength can lead to a higher risk of permanent capital loss. Thus, it is crucial to review a company's financial strength before deciding to invest in its stock. Tenet Healthcare's cash-to-debt ratio is 0.06, which is worse than 87.27% of 652 companies in the Healthcare Providers & Services industry. This indicates that Tenet Healthcare's overall financial strength is poor.
Profitability and Growth of Tenet Healthcare
Investing in profitable companies carries less risk. Tenet Healthcare has been profitable for 5 years over the past 10 years. The company had revenues of $19.9 billion and an Earnings Per Share (EPS) of $4.55 in the past 12 months. Its operating margin of 11.77% is better than 75.61% of 656 companies in the Healthcare Providers & Services industry. However, the company's growth ranks worse than 77.03% of 566 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can help evaluate its profitability. Tenet Healthcare's ROIC is 7.43, while its WACC is 7, suggesting that the company is likely creating value for its shareholders.
Conclusion
In conclusion, Tenet Healthcare (THC, Financial) stock appears to be modestly undervalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 50.1% of 517 companies in the Healthcare Providers & Services industry. To learn more about Tenet Healthcare stock, check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
