What Do You Need to Know About Tenet Healthcare (THC) Before Investing?

Tenet Healthcare logged a 0.9% change during today's morning session, and is now trading at a price of $75.75 per share.

Tenet Healthcare returned gains of 20.0% last year, with its stock price reaching a high of $85.4 and a low of $36.69. Over the same period, the stock outperformed the S&P 500 index by 13.0%. More recently, the company's 50-day average price was $77.19. Tenet Healthcare Corporation operates as a diversified healthcare services company. Based in Dallas, TX, the mid-cap Health Care company has 75,776 full time employees. Tenet Healthcare has not offered a dividend during the last year.

The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:

2018-02-26 2019-02-25 2020-02-24 2021-02-19 2022-02-18 2023-02-21
Revenue (MM) $19,179 $18,313 $18,479 $18,522 $19,676 $19,368
Gross Margins 36.0% 36.0% 36.0% 84.0% 83.0% 83.0%
Operating Margins 7% 9% 9% 12% 12% 12%
Net Margins -4.0% 1.0% -1.0% 2.0% 5.0% 2.0%
Net Income (MM) -$704 $104 -$215 $399 $916 $409
Net Interest Expense (MM) -$1,028 -$1,004 -$985 -$1,003 -$923 -$890
Depreciation & Amort. (MM) -$870 -$802 -$850 -$857 -$855 -$841
Earnings Per Share -$7.0 $1.0 -$2.08 $3.75 $8.42 $3.7
EPS Growth n/a 114.29% -308.0% 280.29% 124.53% -56.06%
Diluted Shares (MM) 101 104 103 106 109 111
Free Cash Flow (MM) $1,080 $1,123 $1,823 $3,870 $978 $1,635
Capital Expenditures (MM) $120 -$74 -$590 -$463 $590 -$552
Net Current Assets (MM) -$15,407 -$15,666 -$16,341 -$17,070 -$16,247 -$16,567
Long Term Debt (MM) $14,791 $14,644 $14,580 $15,574 $15,511 $14,934
Net Debt / EBITDA 6.34 5.98 5.68 4.43 4.07 4.37

Tenet Healthcare has wider gross margins than its peer group, average operating margins with a positive growth rate, and positive EPS growth. However, the firm has a highly leveraged balance sheet. Finally, we note that Tenet Healthcare has weak revenue growth and a flat capital expenditure trend, irregular cash flows, and just enough current assets to cover current liabilities.

A Lower P/E Ratio Than Its Sector Average but Trades Above Its Graham Number:

Tenet Healthcare has a trailing twelve month P/E ratio of 16.5, compared to an average of 24.45 for the Health Care sector. Based on its EPS guidance of $6.68, the company has a forward P/E ratio of 11.6. The company doesn't issue forward earnings guidance, and the compound average growth rate of its last 6 years of reported EPS is 8.9%. On this basis, the company's PEG ratio is 1.85, which suggests that it is overpriced. Furthermore, Tenet Healthcare is likely overvalued compared to the book value of its equity, since its P/B ratio of 5.73 is higher than the sector average of 4.16. The company's shares are currently trading 28.6% above their Graham number.

Overview of Tenet Healthcare's Market Factors:

Tenet Healthcare has an average amount of shares sold short because 4.2% of the company's shares are sold short. Institutions own 99.4% of the company's shares, and the insider ownership rate stands at 1.79%, suggesting a small amount of insider investors. The largest shareholder is Vanguard Group Inc, whose 11% stake in the company is worth $823,722,922.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.