A strong performer from today's morning trading session is Universal Health Services, whose shares rose 2.2% to $143.87 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
Universal Health Services, Inc., through its subsidiaries, owns and operates acute care hospitals, and outpatient and behavioral health care facilities. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, Universal Health Services has a trailing 12 month P/E ratio of 15.7 and a P/B ratio of 1.7.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
Universal Health Services's PEG ratio is 3.4, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.