Key insights
- The article discusses Universal Health Services (UHS) potentially being undervalued based on P/E, price-to-book, and current ratios, with positive cash flow and growing margins. However, it notes market concerns about potential wage inflation due to nurse shortages and possible reductions in federal payments related to healthcare policy changes, which the author believes may be over-discounted. The author is seeking further insight into these potential risks.
I've been looking into UHS stock lately, as it's trading near its 52w low and the fundamentals seem solid. I started by looking at the following metrics, and they all seem nice:
-trailing P/E = 6,12 (considering price / diluted EPS)
-price to book = 1,20 (altough it goes to 2,6 if you remove Goodwill from assets)
-current Ratio = 1,05
The business has been growing steadily, and costs seem to be under control, with gross margins increasing.
Cash flow is positive (in 2025 FCF is $824M plus $967M of buybacks) and growing.
I've read that the stock is down because the market is already pricing in potential wage increases (mainly due to a shortage of nurses) and possible future reductions in payments from the federal government (the end of Obamacare?). I admit that I'm not able to properly evaluate this part not being American. Those reasons do not seem to me to fully explain a price so low anyway.
Do you think I'm missing something here?
Disclaimer: I initiated a (small) position in UHS in the previous days.