It hasn't been a great afternoon session for Tenet Healthcare investors, who have watched their shares sink by -4.8% to a price of $156.74. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
a Decline in Expected Earnings Clouds Its Value Outlook but Priced Beyond Its Margin of Safety:
Tenet Healthcare Corporation operates as a diversified healthcare services company in the United States. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 27.61 and an average price to book (P/B) ratio of 3.69. In contrast, Tenet Healthcare has a trailing 12 month P/E ratio of 5.7 and a P/B ratio of 4.32.
Tenet Healthcare has moved 135.2% over the last year compared to 26.8% for the S&P 500 — a difference of 108.4%. Tenet Healthcare has a 52 week high of $166.89 and a 52 week low of $51.04.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $18,313 | $18,479 | $17,640 | $19,485 | $19,174 | $20,548 |
| Operating Margins | 9% | 8% | 11% | 15% | 12% | 12% |
| Net Margins | 3% | 1% | 4% | 8% | 5% | 6% |
| Net Income (M) | $459 | $171 | $768 | $1,476 | $1,001 | $1,311 |
| Net Interest Expense (M) | $1,004 | $985 | $1,003 | $923 | $890 | $901 |
| Depreciation & Amort. (M) | $802 | $850 | $857 | $855 | $841 | $870 |
| Diluted Shares (M) | 104 | 103 | 106 | 109 | 111 | 105 |
| Earnings Per Share | $4.42 | $1.65 | $7.23 | $13.59 | $9.06 | $12.51 |
| EPS Growth | n/a | -62.67% | 338.18% | 87.97% | -33.33% | 38.08% |
| Avg. Price | $27.13 | $24.76 | $26.57 | $64.32 | $75.02 | $156.29 |
| P/E Ratio | 5.98 | 14.83 | 3.61 | 4.63 | 8.05 | 12.19 |
| Free Cash Flow (M) | $432 | $563 | $2,867 | $910 | $321 | $1,623 |
| CAPEX (M) | $617 | $670 | $540 | $658 | $762 | $751 |
| EV / EBITDA | 12.96 | 13.17 | 11.06 | 9.52 | 11.68 | 13.17 |
| Total Debt (M) | $29,288 | $29,160 | $31,148 | $31,022 | $29,868 | $29,764 |
| Net Debt / EBITDA | 11.84 | 12.11 | 10.09 | 7.69 | 9.14 | 8.44 |
| Current Ratio | 1.2 | 1.21 | 1.47 | 1.38 | 1.34 | 1.51 |
Tenet Healthcare benefits from strong operating margins with a positive growth rate, generally positive cash flows, and slight revenue growth and increasing reinvestment in the business. The company's financial statements show a strong EPS growth trend and a decent current ratio of 1.51. However, the firm has a highly leveraged balance sheet.
