Community Health Systems, Inc. ( CYH Quick Quote CYH - Free Report) has emerged as a lucrative investment option, courtesy of continuous divestitures, improved telehealth services and lower costs. In fact, these factors instill optimism in the stock’s long-term prospects as well.
The stock currently has a Zacks Rank #2 (Buy) and a
VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors. Back-tested results have shown that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2 are the best investment options. You can see . the complete list of today’s Zacks #1 Rank stocks here
Let’s analyze the factors that make this stock a compelling choice for investors right now.
Strong Earnings Surprise History: Community Health boasts an impressive earnings surprise record. It has a trailing four-quarter earnings surprise of 58.25%, on average. Positive Estimate Revision: The Zacks Consensus Estimate for current-quarter and current-year earnings have been revised upward by 55.6% and 18.2%, respectively, over the past 60 days. Solid Prospects: The Zacks Consensus Estimate for the company’s current-year earnings indicate an improvement of 29.21% from the prior-year reported number. The same is also higher than the industry’s expected earnings growth rate of 9%. Focus on Divestitures to Streamline Operations: Community Health has been actively pursuing hospital divestitures on a constant basis. Through these initiatives, the healthcare provider intends to get rid of non-core assets and intensify focus on its core operations, which in turn, will lead to sound growth prospects and fetch higher returns. After divesting 12 hospitals in 2019, the first nine months of 2020 were no exception to the trend. In fact, Community Health completed the divestment of eight hospitals during the first nine months of 2020. The proceeds derived from these dispositions have made the company optimistic regarding availability of sufficient liquidity in the days ahead. Enhanced Telehealth Services: It is worth mentioning that telehealth services were gradually gaining traction in the healthcare industry for quite some time but the COVID-19 pandemic made people realize the importance of these services. Imposition of stringent lockdowns and social distancing measures to curb the virus spread propelled individuals to resort to telehealth services as the only feasible option. Case in point, Community Health has enhanced its telehealth services to cater to numerous patients grappling with severe health woes while eliminating physical contact. As a result, the company has been witnessing high volume of telehealth visits and remains well-poised to capitalize on the current scenario as these services will continue to be in high demand beyond the pandemic. Decline in Operating Costs: Community Health has been striving to lower expenses through several initiatives, ranging from bringing about automation in their processes to engaging in constant divestitures. Case in point, these cost-curbing efforts have led to a plunge in operating expenses in the past three years. The trend continued in the first nine months of 2020, which slumped 15.5% year over year. The healthcare provider has been effectively managing variable costs not only in a situation when the company’s volumes started recovering in the third quarter but also amid lower volumes reported due to strict restrictions on elective procedures and shelter-in-place orders. Price Performance
Shares of Community Health have soared 145.5% in the past six months compared with the industry’s rally of 66.5%.
The price performance looks impressive in comparison to its peers, namely,
Tenet Healthcare Corporation ( THC Quick Quote THC - Free Report) , Acadia Healthcare Company, Inc. ( ACHC Quick Quote ACHC - Free Report) and HCA Healthcare, Inc. ( HCA Quick Quote HCA - Free Report) . While shares of Tenet Healthcare rallied 119.9% in the past six months, shares of Acadia Healthcare and HCA Healthcare have gained 100.2% and 67.2%, respectively, in the same time frame. Legal Marijuana: An Investor’s Dream
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