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Why Should You Hold Universal Health in Your Portfolio?

Zacks Equity Research

Universal Health Services, Inc. UHS is well-poised for growth on the back of its segmental performances and solid revenues.

The stock carries an impressive 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.  

The company’s top line has been witnessing a consistent rise since 2010, which pleases investors. This positivity was driven by solid inorganic growth and a strong performance at both its segments, namely Acute Care and Behavioral Health.

Acute care is a branch of secondary healthcare where a patient receives short-term treatment for urgent medical conditions whereas the Behavioral Platform works on behavioral indications like eating disorders, sexual trauma, autism and disorderliness in the military through its patriot support program. Since 2012, average number of licensed beds in both segments have been rising, boosting revenues in turn. Evidently, its top line witnessed a CAGR of 10.35% during the 2010-2018 period. It was also up 5.8% year over year in the first nine months of 2019, led by increased admissions and patient days. We expect this trend to continue owing to solid segmental performances.

Moreover, over the years, Universal Health’s acquisitions have been instrumental in building its growth track by adding facilities, bed and hospital to its business portfolio. We believe, the company will continue with a series of buyouts that will help boost its domestic and international presence alongside leveraging its position to weather the regulatory uncertainties in the healthcare sector.

Universal Health also boasts a strong capital position owing to its balance sheet strength. Its board of directors recently added $1 billion to its current share buyback program. In July, the company also hiked its cash dividend by 50%, which should instill investor confidence in the stock.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $9.81, suggesting a rise of 2.9% on 5.5% higher revenues of $11.4 billion from the year-ago reported figures.

For 2020, the Zacks Consensus Estimate for earnings per share stands at $10.65 on $11.8 billion revenues, implying a respective 8.6% and 4.3% increase from the prior-year reported numbers.

Shares of this Zacks Rank #3 (Hold) company have gained 6.6% in a year's time, outperforming its industry's growth of 1.2%.

Stocks to Consider

Investors interested in the medical sector might consider some better-ranked stocks like Select Medical Holdings Corporation SEM, WellCare Health Plans, Inc. WCG and Genesis Healthcare, Inc. GEN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Select Medical Holdings operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics and occupational health centers. In the trailing four quarters, the company’s average beat was 11.07%.

WellCare Health offers managed care services to government-sponsored health care programs. The company pulled off average positive surprise of 17.32% in the preceding four quarters.

Genesis Healthcare operates skilled nursing facilities and assisted/senior living facilities. In the last four quarters, the company delivered average beat of 80.96%.

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Select Medical Holdings Corporation (SEM) : Free Stock Analysis Report
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