HCA Stock Declines - What's Next?

By Naomi Wentworth • Sunday, November 24 10:11 • Permanent Link

Tumbling to a price of $324.93 during today's morning trading session, shares of HCA Healthcare are now -20.3% below their average target price of $407.67. Does this mean the stock will reverse course? Analysts are giving HCA an average rating of buy and target prices ranging from 316.0 to 460.0 dollars per share.

The market seems to share this optimistic view, since HCA Healthcare has a short interest of only 1.4% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

Another way to gauge the sentiment on HCA Healthcare is to look at the percentage of institutions that are invested in the stock. In this case, 63.6% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.

If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.

Overall, there is positive market sentiment towards HCA Healthcare because of an analyst consensus of strong upside potential, a buy rating, a very low short interest, and an average number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about HCA:

It has trailing 12 month earnings per share (EPS) of $22.26 per share
HCA Healthcare has a trailing 12 month Price to Earnings (P/E) ratio of 14.6 while the S&P 500 average is 29.3
HCA Healthcare is a Health Care company, and the sector average P/E and P/B ratios are 26.07 and 3.53 respectively

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.