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.
Can HCA Holdings (HCA) Be a Top Choice for Value Investors?
Read MoreHide Full Article
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put HCA Holdings Inc. (HCA - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, HCA Holdings has a trailing twelve months PE ratio of 11.90, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.92. If we focus on the long-term PE trend, HCA Holding’s current PE is little below its mid point level, with the number having trended downward over the last few months. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Furthermore, the stock’s PE also compares favorably with the Zacks classified Medical-Hospital industry’s trailing twelve months PE ratio, which stands at 14.60. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
In fact, if we look at the following chart, we can see that the stock’s price trend has been downward in recent times, despite strong earnings expansion. This indicates that the price has not yet appreciated enough to reflect the growth in earnings, and thus, the company remains a strong value proposition.
However, we should also point out that HCA Holdings has a forward PE ratio (price relative to this year’s earnings) of 11.11, which is a little below the current level. Hence, we could say that forward earnings estimates are roughly incorporated in the company’s current share price.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, HCA Holdings has a P/S ratio of about 0.75. This is significantly lower than the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, HCA is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, HCA Holdings currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes HCA Holdings a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for HCA Holdings is just 0.97, a level that is lower than the industry average of 1.05. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, HCA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though HCA Holdings might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘D’. As a result, HCA Holdings has a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s estimate revision trend has been positive. The current quarter has seen one estimate go higher in the past sixty days compared to no movement in the opposite direction, while the full year estimate has seen two estimates going up with no downward movements over the same time frame.
This has had a modest impact on the consensus estimate, as the current quarter estimate has increased 0.6% over the past two months, while the full year estimate has inched up 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat bullish trend indicates that analysts feel good about this company right now, despite the fact that the stock has just a Zacks Rank #3 (Hold), which signals expectations of in-line performance from the company in the near term.
Bottom Line
HCA Holdings is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 32%) should boost investor confidence.
However over the past two years, the Zacks Medical-Hospital industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in HCA Holdings.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Can HCA Holdings (HCA) Be a Top Choice for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put HCA Holdings Inc. (HCA - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, HCA Holdings has a trailing twelve months PE ratio of 11.90, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.92. If we focus on the long-term PE trend, HCA Holding’s current PE is little below its mid point level, with the number having trended downward over the last few months. Moreover, the current level is fairly below the highs for this stock, suggesting that the stock is undervalued compared to its historical levels.
Furthermore, the stock’s PE also compares favorably with the Zacks classified Medical-Hospital industry’s trailing twelve months PE ratio, which stands at 14.60. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
In fact, if we look at the following chart, we can see that the stock’s price trend has been downward in recent times, despite strong earnings expansion. This indicates that the price has not yet appreciated enough to reflect the growth in earnings, and thus, the company remains a strong value proposition.
However, we should also point out that HCA Holdings has a forward PE ratio (price relative to this year’s earnings) of 11.11, which is a little below the current level. Hence, we could say that forward earnings estimates are roughly incorporated in the company’s current share price.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, HCA Holdings has a P/S ratio of about 0.75. This is significantly lower than the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, HCA is towards the higher end of its range in the time period from a P/S metric, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, HCA Holdings currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes HCA Holdings a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for HCA Holdings is just 0.97, a level that is lower than the industry average of 1.05. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, HCA is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though HCA Holdings might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘A’ and a Momentum score of ‘D’. As a result, HCA Holdings has a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s estimate revision trend has been positive. The current quarter has seen one estimate go higher in the past sixty days compared to no movement in the opposite direction, while the full year estimate has seen two estimates going up with no downward movements over the same time frame.
This has had a modest impact on the consensus estimate, as the current quarter estimate has increased 0.6% over the past two months, while the full year estimate has inched up 0.4%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
HCA Holdings, Inc. Price and Consensus
HCA Holdings, Inc. Price and Consensus | HCA Holdings, Inc. Quote
This somewhat bullish trend indicates that analysts feel good about this company right now, despite the fact that the stock has just a Zacks Rank #3 (Hold), which signals expectations of in-line performance from the company in the near term.
Bottom Line
HCA Holdings is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 32%) should boost investor confidence.
However over the past two years, the Zacks Medical-Hospital industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in HCA Holdings.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>