Back to top

Image: Bigstock

Tenet (THC) Hits Fresh High: Is There Still Room to Run?

Read MoreHide Full Article

Have you been paying attention to shares of Tenet Healthcare (THC - Free Report) ? Shares have been on the move with the stock up 9.3% over the past month. The stock hit a new 52-week high of $70.75 in the previous session. Tenet Healthcare has gained 71.9% since the start of the year compared to the 2% move for the Zacks Medical sector and the 24.9% return for the Zacks Medical - Hospital industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 20, 2021, Tenet reported EPS of $1.3 versus consensus estimate of $0.8 while it beat the consensus revenue estimate by 0.01%.

For the current fiscal year, Tenet is expected to post earnings of $5.26 per share on $19.63 billion in revenues. This represents a 11.21% change in EPS on a 11.3% change in revenues. For the next fiscal year, the company is expected to earn $5.66 per share on $20.5 billion in revenues. This represents a year-over-year change of 7.54% and 4.41%, respectively.

Valuation Metrics

Tenet may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Tenet has a Value Score of A. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 13.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 5.2X versus its peer group's average of 10.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Tenet currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Tenet meets the list of requirements. Thus, it seems as though Tenet shares could have potential in the weeks and months to come.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Tenet Healthcare Corporation (THC) - free report >>

Published in