Universal Health Services (NYSE:UHS) Presents a Compelling Value Opportunity

Investors looking for chances in the equity markets often use a disciplined plan to find stocks trading below their estimated real worth. One such method involves searching for companies that mix a good price with firm basic business qualities. The aim is to find stocks where the market cost does not completely show the company's financial condition, earnings ability, and future possibilities, possibly providing a safety buffer for the patient investor. This plan focuses on a low buy cost compared to profits and assets, but requires that the low price is real, the company must also show operational might and steadiness.

A recent search for such "acceptable value" chances has pointed to Universal Health Services, Inc. (NYSE:UHS), a leading operator of acute care and behavioral health facilities. The search specifically looked for stocks with a good price rating while still keeping acceptable marks in earnings, financial condition, and expansion. This mix is key; a low-cost stock is only a real find if the company is basically healthy and not in a lasting downturn. A full fundamental analysis report on UHS gives the number-based support for this review.

Valuation: An Attractive Starting Price

The most noticeable part of UHS is its price, which gets a high 8 out of 10 in the fundamental report. The stock seems priced low next to both its industry and the wider market.

• Price-to-Earnings (P/E): At 10.94, the P/E ratio for UHS is much lower than the industry average of 36.92 and the S&P 500 average of 26.92. It costs less than 87% of similar companies in the Health Care Providers & Services field.
• Forward P/E: The price looks even more sensible looking ahead, with a ratio of 9.56 compared to an industry average of 37.27.
• Enterprise Value to EBITDA: This measure, which includes debt, also shows a rather low price relative to the industry.

For a plan focused on good prices, these numbers are the first step. They imply the market is using a careful view of UHS's profits, maybe because of field-wide worries or missing the company's own good points. This lower price sets up the chance for the stock price to rise if the market revalues the company.

Profitability: Firm Operational Results

A low price is only interesting if the company truly earns money. UHS does well here, with an earnings rating of 7. The report shows the company is in the better part of its industry for several important efficiency measures.

• Good Returns: The company shows notable returns on capital, with a Return on Invested Capital (ROIC) of 12.33%, doing better than 87% of industry peers. Its Return on Equity of 19.18% is also firm.
• Sound Margins: UHS keeps good profit and operating margins of 8.09% and 11.47%, respectively, putting it with the better companies in its field.
• Steady Profits: The company has recorded positive profits and operating cash flow in each of the last five years, showing a history of stability.

This steady earnings ability is needed for the value argument. It confirms that the company's low stock price is not a sign of bad operations but may be a market mistake. Firm and stable profits create the base for future expansion and investor gains.

Financial Health: A Mostly Firm Base

Financial condition, with a rating of 5, is the part with some small points to watch, though the full view is still satisfactory. An investor looking for good prices needs confidence that a company can handle economic drops and pay its debts.

• Solvency Points: UHS has an Altman-Z score of 3.23, showing a low short-term chance of failure and doing better than 68% of its industry. Its debt amounts, as seen in the Debt/Equity and Debt-to-Free-Cash-Flow ratios, are workable and similar to or better than many peers.
• Liquidity Points: The report notes the company's Current and Quick ratios as being below the industry, suggesting a closer cash position. This is an area for investors to watch, though it is balanced by the firm and steady cash creation noted in the earnings study.

Growth: A Supportive Path

With an expansion rating of 5, UHS shows a sensible, if not fast, growth path that supports its price. Investing for value does not need very fast growth, but it does need a business that is not standing still.

• Firm Recent EPS Growth: Earnings Per Share grew by a notable 40.07% over the last year, with a sound 10.74% average yearly growth rate over recent years.
• Steady Revenue Increase: Revenue has grown at almost 7% yearly and rose by over 10% in the last year.
• Positive Future Views: Experts expect EPS growth to continue at a rate of over 13% yearly in the next few years.

This growth setting is important because it suggests the company's real worth is probably rising over time. When mixed with a low profits multiple, it leads to a low PEG ratio, which further supports the stock's price appeal.

Conclusion

Universal Health Services shows an example of a possible value chance. It trades at a notable discount to the market and its own industry, as shown by its high price rating. Importantly, this low cost is linked to a company that displays strong earnings ability, satisfactory financial condition, and a steady growth path. For an investor using a plan that looks for low-priced stocks with healthy basics, UHS seems to meet the main needs: it is a profitable, expanding business available at a cost that may not fully show its operational might.

This study of UHS came from a step-by-step search process. Investors curious about finding other companies that match a similar outline of good price along with acceptable basics can review the Decent Value Stocks screen for more possible ideas.

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Disclaimer: This article is for information only and is not financial guidance, a suggestion to buy or sell any security, or a support of any investment plan. Investors should do their own study and think about their personal money situation and risk comfort before making any investment choices.