In December 2017, Universal Health Services Inc (NYSE:UHS) announced its latest earnings update. Overall, analyst consensus outlook appear cautiously optimistic, with earnings expected to grow by 19.55% in the upcoming year relative to the past 5-year average growth rate of 12.42%. With net income at current levels of US$751.94M, we should see this rise to US$898.92M in 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Universal Health Services in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here. See our latest analysis for Universal Health Services
How will Universal Health Services perform in the near future?
The longer term expectations from the 16 analysts of UHS is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of 10.35% based on the most recent earnings level of US$751.94M to the final forecast of US$1.02B by 2021. This leads to an EPS of $11.4 in the final year of projections relative to the current EPS of $7.86. Growth in earnings appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. With a current profit margin of 7.22%, this movement will result in a margin of 8.38% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Universal Health Services, I’ve put together three important aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Universal Health Services worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Universal Health Services is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Universal Health Services? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.