Intrinsic value of HCA Holdings - HCA

Previous Close

$78.99

  Intrinsic Value

$30.26

stock screener

  Rating & Target

str. sell

-62%

  Value-price divergence*

+15%

Previous close

$78.99

 
Intrinsic value

$30.26

 
Up/down potential

-62%

 
Rating

str. sell

 
Value-price divergence*

+15%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of HCA stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 29.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.57
  3.50
  3.65
  3.78
  3.91
  4.02
  4.11
  4.20
  4.28
  4.35
  4.42
  4.48
  4.53
  4.58
  4.62
  4.66
  4.69
  4.72
  4.75
  4.77
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
Revenue, $m
  41,490
  42,942
  44,510
  46,194
  47,999
  49,926
  51,980
  54,165
  56,485
  58,944
  61,549
  64,304
  67,217
  70,293
  73,540
  76,964
  80,575
  84,380
  88,388
  92,608
  97,051
  101,726
  106,646
  111,820
  117,263
  122,986
  129,002
  135,328
  141,976
  148,963
  156,306
Variable operating expenses, $m
 
  22,564
  23,363
  24,222
  25,142
  26,125
  27,172
  28,286
  29,469
  30,723
  32,051
  32,785
  34,270
  35,838
  37,494
  39,240
  41,080
  43,020
  45,064
  47,215
  49,481
  51,864
  54,372
  57,011
  59,785
  62,703
  65,771
  68,996
  72,385
  75,948
  79,691
Fixed operating expenses, $m
 
  13,899
  14,246
  14,603
  14,968
  15,342
  15,725
  16,119
  16,522
  16,935
  17,358
  17,792
  18,237
  18,693
  19,160
  19,639
  20,130
  20,633
  21,149
  21,678
  22,220
  22,775
  23,345
  23,928
  24,526
  25,139
  25,768
  26,412
  27,072
  27,749
  28,443
Total operating expenses, $m
  35,050
  36,463
  37,609
  38,825
  40,110
  41,467
  42,897
  44,405
  45,991
  47,658
  49,409
  50,577
  52,507
  54,531
  56,654
  58,879
  61,210
  63,653
  66,213
  68,893
  71,701
  74,639
  77,717
  80,939
  84,311
  87,842
  91,539
  95,408
  99,457
  103,697
  108,134
Operating income, $m
  6,440
  6,479
  6,900
  7,369
  7,889
  8,460
  9,083
  9,760
  10,495
  11,287
  12,140
  13,727
  14,710
  15,762
  16,886
  18,086
  19,365
  20,726
  22,175
  23,715
  25,351
  27,087
  28,929
  30,882
  32,951
  35,143
  37,464
  39,920
  42,518
  45,266
  48,172
EBITDA, $m
  8,406
  8,573
  9,046
  9,572
  10,151
  10,785
  11,477
  12,227
  13,038
  13,912
  14,852
  15,860
  16,939
  18,093
  19,325
  20,638
  22,036
  23,524
  25,106
  26,786
  28,569
  30,460
  32,465
  34,589
  36,839
  39,221
  41,741
  44,407
  47,226
  50,206
  53,354
Interest expense (income), $m
  1,666
  1,694
  1,175
  1,237
  1,304
  1,375
  1,451
  1,533
  1,619
  1,711
  1,808
  1,911
  2,020
  2,135
  2,257
  2,385
  2,521
  2,663
  2,814
  2,972
  3,139
  3,315
  3,500
  3,694
  3,899
  4,114
  4,340
  4,578
  4,829
  5,091
  5,368
Earnings before tax, $m
  4,810
  4,785
  5,725
  6,132
  6,585
  7,084
  7,631
  8,228
  8,876
  9,576
  10,332
  11,816
  12,690
  13,627
  14,629
  15,701
  16,844
  18,063
  19,361
  20,743
  22,211
  23,772
  25,429
  27,187
  29,052
  31,029
  33,123
  35,341
  37,690
  40,175
  42,804
Tax expense, $m
  1,378
  1,292
  1,546
  1,656
  1,778
  1,913
  2,060
  2,222
  2,396
  2,586
  2,790
  3,190
  3,426
  3,679
  3,950
  4,239
  4,548
  4,877
  5,228
  5,600
  5,997
  6,418
  6,866
  7,341
  7,844
  8,378
  8,943
  9,542
  10,176
  10,847
  11,557
Net income, $m
  2,890
  3,493
  4,179
  4,477
  4,807
  5,172
  5,571
  6,006
  6,479
  6,991
  7,543
  8,626
  9,264
  9,948
  10,679
  11,461
  12,296
  13,186
  14,134
  15,142
  16,214
  17,354
  18,563
  19,847
  21,208
  22,651
  24,180
  25,799
  27,513
  29,328
  31,247

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  646
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  33,758
  34,941
  36,216
  37,587
  39,055
  40,624
  42,295
  44,073
  45,960
  47,961
  50,081
  52,323
  54,692
  57,195
  59,837
  62,624
  65,561
  68,657
  71,918
  75,352
  78,967
  82,772
  86,774
  90,985
  95,413
  100,070
  104,965
  110,112
  115,521
  121,207
  127,182
Adjusted assets (=assets-cash), $m
  33,112
  34,941
  36,216
  37,587
  39,055
  40,624
  42,295
  44,073
  45,960
  47,961
  50,081
  52,323
  54,692
  57,195
  59,837
  62,624
  65,561
  68,657
  71,918
  75,352
  78,967
  82,772
  86,774
  90,985
  95,413
  100,070
  104,965
  110,112
  115,521
  121,207
  127,182
Revenue / Adjusted assets
  1.253
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
  1.229
Average production assets, $m
  15,683
  16,232
  16,825
  17,461
  18,144
  18,872
  19,649
  20,474
  21,351
  22,281
  23,266
  24,307
  25,408
  26,571
  27,798
  29,093
  30,457
  31,896
  33,411
  35,006
  36,685
  38,453
  40,312
  42,268
  44,325
  46,489
  48,763
  51,154
  53,667
  56,308
  59,084
Working capital, $m
  3,252
  2,920
  3,027
  3,141
  3,264
  3,395
  3,535
  3,683
  3,841
  4,008
  4,185
  4,373
  4,571
  4,780
  5,001
  5,234
  5,479
  5,738
  6,010
  6,297
  6,599
  6,917
  7,252
  7,604
  7,974
  8,363
  8,772
  9,202
  9,654
  10,129
  10,629
Total debt, $m
  31,376
  21,763
  22,910
  24,144
  25,466
  26,877
  28,381
  29,981
  31,680
  33,481
  35,388
  37,406
  39,539
  41,792
  44,169
  46,677
  49,321
  52,107
  55,042
  58,133
  61,387
  64,810
  68,413
  72,202
  76,188
  80,379
  84,785
  89,417
  94,285
  99,402
  104,779
Total liabilities, $m
  41,060
  31,447
  32,594
  33,828
  35,150
  36,561
  38,065
  39,665
  41,364
  43,165
  45,072
  47,090
  49,223
  51,476
  53,853
  56,361
  59,005
  61,791
  64,726
  67,817
  71,071
  74,494
  78,097
  81,886
  85,872
  90,063
  94,469
  99,101
  103,969
  109,086
  114,463
Total equity, $m
  -7,302
  3,494
  3,622
  3,759
  3,906
  4,062
  4,229
  4,407
  4,596
  4,796
  5,008
  5,232
  5,469
  5,720
  5,984
  6,262
  6,556
  6,866
  7,192
  7,535
  7,897
  8,277
  8,677
  9,098
  9,541
  10,007
  10,497
  11,011
  11,552
  12,121
  12,718
Total liabilities and equity, $m
  33,758
  34,941
  36,216
  37,587
  39,056
  40,623
  42,294
  44,072
  45,960
  47,961
  50,080
  52,322
  54,692
  57,196
  59,837
  62,623
  65,561
  68,657
  71,918
  75,352
  78,968
  82,771
  86,774
  90,984
  95,413
  100,070
  104,966
  110,112
  115,521
  121,207
  127,181
Debt-to-equity ratio
  -4.297
  6.230
  6.330
  6.420
  6.520
  6.620
  6.710
  6.800
  6.890
  6.980
  7.070
  7.150
  7.230
  7.310
  7.380
  7.450
  7.520
  7.590
  7.650
  7.710
  7.770
  7.830
  7.880
  7.940
  7.990
  8.030
  8.080
  8.120
  8.160
  8.200
  8.240
Adjusted equity ratio
  -0.240
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  2,890
  3,493
  4,179
  4,477
  4,807
  5,172
  5,571
  6,006
  6,479
  6,991
  7,543
  8,626
  9,264
  9,948
  10,679
  11,461
  12,296
  13,186
  14,134
  15,142
  16,214
  17,354
  18,563
  19,847
  21,208
  22,651
  24,180
  25,799
  27,513
  29,328
  31,247
Depreciation, amort., depletion, $m
  1,966
  2,094
  2,146
  2,202
  2,262
  2,326
  2,394
  2,466
  2,543
  2,625
  2,711
  2,132
  2,229
  2,331
  2,438
  2,552
  2,672
  2,798
  2,931
  3,071
  3,218
  3,373
  3,536
  3,708
  3,888
  4,078
  4,277
  4,487
  4,708
  4,939
  5,183
Funds from operations, $m
  2,438
  5,587
  6,325
  6,679
  7,069
  7,497
  7,965
  8,473
  9,022
  9,616
  10,254
  10,758
  11,493
  12,278
  13,118
  14,013
  14,968
  15,984
  17,064
  18,213
  19,432
  20,727
  22,099
  23,554
  25,096
  26,729
  28,457
  30,286
  32,221
  34,267
  36,430
Change in working capital, $m
  -3,215
  99
  107
  115
  123
  131
  140
  149
  158
  167
  177
  187
  198
  209
  221
  233
  246
  259
  273
  287
  302
  318
  335
  352
  370
  389
  409
  430
  452
  475
  499
Cash from operations, $m
  5,653
  5,488
  6,219
  6,564
  6,946
  7,366
  7,825
  8,324
  8,865
  9,448
  10,077
  10,571
  11,295
  12,069
  12,897
  13,781
  14,722
  15,725
  16,792
  17,926
  19,130
  20,409
  21,765
  23,203
  24,726
  26,340
  28,048
  29,856
  31,769
  33,792
  35,930
Maintenance CAPEX, $m
  0
  -1,376
  -1,424
  -1,476
  -1,532
  -1,592
  -1,655
  -1,724
  -1,796
  -1,873
  -1,954
  -2,041
  -2,132
  -2,229
  -2,331
  -2,438
  -2,552
  -2,672
  -2,798
  -2,931
  -3,071
  -3,218
  -3,373
  -3,536
  -3,708
  -3,888
  -4,078
  -4,277
  -4,487
  -4,708
  -4,939
New CAPEX, $m
  -2,760
  -549
  -592
  -637
  -682
  -729
  -776
  -826
  -877
  -930
  -985
  -1,042
  -1,101
  -1,163
  -1,227
  -1,295
  -1,365
  -1,438
  -1,515
  -1,595
  -1,679
  -1,767
  -1,860
  -1,956
  -2,057
  -2,163
  -2,274
  -2,391
  -2,513
  -2,641
  -2,776
Cash from investing activities, $m
  -3,240
  -1,925
  -2,016
  -2,113
  -2,214
  -2,321
  -2,431
  -2,550
  -2,673
  -2,803
  -2,939
  -3,083
  -3,233
  -3,392
  -3,558
  -3,733
  -3,917
  -4,110
  -4,313
  -4,526
  -4,750
  -4,985
  -5,233
  -5,492
  -5,765
  -6,051
  -6,352
  -6,668
  -7,000
  -7,349
  -7,715
Free cash flow, $m
  2,413
  3,564
  4,202
  4,451
  4,733
  5,046
  5,393
  5,775
  6,192
  6,646
  7,138
  7,488
  8,062
  8,678
  9,339
  10,048
  10,806
  11,615
  12,479
  13,400
  14,380
  15,423
  16,532
  17,710
  18,961
  20,288
  21,696
  23,188
  24,769
  26,443
  28,215
Issuance/(repayment) of debt, $m
  815
  -9,613
  1,148
  1,234
  1,321
  1,412
  1,504
  1,600
  1,699
  1,801
  1,907
  2,018
  2,133
  2,253
  2,378
  2,508
  2,644
  2,786
  2,935
  3,091
  3,253
  3,424
  3,602
  3,789
  3,985
  4,191
  4,406
  4,632
  4,869
  5,117
  5,377
Issuance/(repurchase) of shares, $m
  -2,751
  7,303
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -2,508
  -2,310
  1,148
  1,234
  1,321
  1,412
  1,504
  1,600
  1,699
  1,801
  1,907
  2,018
  2,133
  2,253
  2,378
  2,508
  2,644
  2,786
  2,935
  3,091
  3,253
  3,424
  3,602
  3,789
  3,985
  4,191
  4,406
  4,632
  4,869
  5,117
  5,377
Total cash flow (excl. dividends), $m
  -95
  1,253
  5,350
  5,685
  6,054
  6,458
  6,898
  7,375
  7,891
  8,447
  9,045
  9,506
  10,194
  10,930
  11,717
  12,556
  13,450
  14,401
  15,414
  16,490
  17,634
  18,847
  20,135
  21,500
  22,947
  24,479
  26,102
  27,820
  29,637
  31,560
  33,593
Retained Cash Flow (-), $m
  -297
  -10,796
  -128
  -137
  -147
  -157
  -167
  -178
  -189
  -200
  -212
  -224
  -237
  -250
  -264
  -279
  -294
  -310
  -326
  -343
  -361
  -380
  -400
  -421
  -443
  -466
  -490
  -515
  -541
  -569
  -597
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -9,543
  5,223
  5,548
  5,907
  6,301
  6,730
  7,197
  7,702
  8,247
  8,833
  9,282
  9,957
  10,680
  11,452
  12,277
  13,156
  14,092
  15,088
  16,147
  17,272
  18,467
  19,734
  21,079
  22,504
  24,014
  25,612
  27,305
  29,096
  30,991
  32,995
Discount rate, %
 
  12.20
  12.81
  13.45
  14.12
  14.83
  15.57
  16.35
  17.17
  18.02
  18.93
  19.87
  20.87
  21.91
  23.00
  24.16
  25.36
  26.63
  27.96
  29.36
  30.83
  32.37
  33.99
  35.69
  37.47
  39.35
  41.31
  43.38
  45.55
  47.83
  50.22
PV of cash for distribution, $m
 
  -8,505
  4,104
  3,799
  3,482
  3,156
  2,825
  2,493
  2,169
  1,856
  1,561
  1,264
  1,024
  813
  631
  478
  354
  255
  178
  121
  80
  51
  32
  19
  11
  6
  3
  2
  1
  0
  0
Current shareholders' claim on cash, %
  100
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0
  50.0

HCA Holdings, Inc., through its subsidiaries, provides health care services in the United States and England. It operates general, acute care hospitals that offer medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic, and emergency services; and outpatient services, such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology, and physical therapy services. The company also operates psychiatric hospitals, which provide therapeutic programs comprising child, adolescent and adult psychiatric care, and adolescent and adult alcohol and drug abuse treatment and counseling. In addition, it operates outpatient health care facilities consisting of freestanding ambulatory surgery centers, freestanding emergency care facilities, urgent care facilities, walk-in clinics, diagnostic and imaging centers, rehabilitation and physical therapy centers, radiation and oncology therapy centers, physician practices, and various other facilities. As of December 31, 2016, the company operated 166 general, acute care hospitals with 43,778 licensed beds; 3 psychiatric hospitals with 412 licensed beds; and 1 rehabilitation hospital, as well as 118 freestanding surgery centers. HCA Holdings, Inc. was founded in 1968 and is headquartered in Nashville, Tennessee.

FINANCIAL RATIOS  of  HCA Holdings (HCA)

Valuation Ratios
P/E Ratio 10.1
Price to Sales 0.7
Price to Book -4
Price to Tangible Book
Price to Cash Flow 5.2
Price to Free Cash Flow 10.1
Growth Rates
Sales Growth Rate 4.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 16.2%
Cap. Spend. - 3 Yr. Gr. Rate 7.3%
Financial Strength
Quick Ratio 3
Current Ratio 0.2
LT Debt to Equity -426.7%
Total Debt to Equity -429.7%
Interest Coverage 4
Management Effectiveness
Return On Assets 12.3%
Ret/ On Assets - 3 Yr. Avg. 10.9%
Return On Total Capital 12.3%
Ret/ On T. Cap. - 3 Yr. Avg. 10.3%
Return On Equity -38.8%
Return On Equity - 3 Yr. Avg. -29.8%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 83.3%
Gross Margin - 3 Yr. Avg. 83.2%
EBITDA Margin 20.3%
EBITDA Margin - 3 Yr. Avg. 19.5%
Operating Margin 15.5%
Oper. Margin - 3 Yr. Avg. 14.5%
Pre-Tax Margin 11.6%
Pre-Tax Margin - 3 Yr. Avg. 10.3%
Net Profit Margin 7%
Net Profit Margin - 3 Yr. Avg. 5.8%
Effective Tax Rate 28.6%
Eff/ Tax Rate - 3 Yr. Avg. 30.8%
Payout Ratio 0%

HCA stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HCA stock intrinsic value calculation we used $41490 million for the last fiscal year's total revenue generated by HCA Holdings. The default revenue input number comes from 2016 income statement of HCA Holdings. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our HCA stock valuation model: a) initial revenue growth rate of 3.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 12.2%, whose default value for HCA is calculated based on our internal credit rating of HCA Holdings, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of HCA Holdings.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of HCA stock the variable cost ratio is equal to 52.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13560 million in the base year in the intrinsic value calculation for HCA stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for HCA Holdings.

Corporate tax rate of 27% is the nominal tax rate for HCA Holdings. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the HCA stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for HCA are equal to 37.8%.

Life of production assets of 11.4 years is the average useful life of capital assets used in HCA Holdings operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for HCA is equal to 6.8%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $-7302 million for HCA Holdings - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 367.901 million for HCA Holdings is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of HCA Holdings at the current share price and the inputted number of shares is $29.1 billion.

RELATED COMPANIES Price Int.Val. Rating
CYH Community Heal 6.94 38.54  str.buy
THC Tenet Healthca 12.92 29.59  str.buy
UHS Universal Heal 108.68 131.06  hold
SGRY Surgery Partne 9.65 17.51  hold
QHC Quorum Health 4.27 15.19  str.buy

COMPANY NEWS

▶ HCA misses Street 2Q forecasts   [Jul-25-17 11:42PM  Associated Press]
▶ HCA Reports Second Quarter 2017 Results   [08:30AM  Business Wire]
▶ HCA 2nd Quarter 2017 Earnings Conference Call   [Jul-10-17 04:45PM  Business Wire]
▶ How the health-care vote impacts the markets   [Jun-27-17 02:10PM  CNBC Videos]
▶ CBO Deals Blow To Senate's TrumpCare Bill; Sen. Collins To Vote No   [Jun-26-17 06:59PM  Investor's Business Daily]
▶ Trading the CBO: 6 buys in healthcare   [05:00PM  CNBC Videos]
▶ Aventura Hospital seeks approval for major expansion   [Jun-12-17 06:30AM  American City Business Journals]
▶ ETFs with exposure to HCA Healthcare, Inc. : June 8, 2017   [Jun-08-17 01:38PM  Capital Cube]
▶ Steel, chips, planes & more in the blitz   [Jun-07-17 01:27PM  CNBC Videos]
▶ Healthcare Sector Updates for May 2226, 2017   [May-31-17 12:01PM  Market Realist]
▶ S&P 500, Nasdaq Jump to New Records as Crude Oil Slides   [May-25-17 04:31PM  TheStreet.com]
▶ The 3 Best Hospital Stocks to Buy in 2017   [May-17-17 04:42PM  Motley Fool]
▶ Major health care system scoops up four Houston hospitals   [09:21AM  American City Business Journals]
▶ Hospital giant HCA acquires 231-bed hospital in Waycross, Ga.   [07:00AM  American City Business Journals]
▶ Two Hospital Stocks, Two 20% Gains?   [03:39PM  Barrons.com]
▶ HCA Holdings reports Q1 revenue miss   [08:44AM  MarketWatch]
▶ HCA misses Street 1Q forecasts   [08:37AM  Associated Press]
▶ HCA Reports First Quarter 2017 Results   [08:30AM  Business Wire]
▶ Unbundling Billionaire Larry Robbins Portfolio   [Apr-29-17 03:32PM  Insider Monkey]
▶ HCA to Present at May Healthcare Conferences   [Apr-28-17 08:16AM  Business Wire]
▶ Vote on Obamacare Repeal Could Come Friday   [Apr-26-17 03:22PM  TheStreet.com]
▶ HCA in talks to buy Savannah hospital for $710 million   [Apr-21-17 08:00AM  American City Business Journals]
▶ HCA Stock Sliding on First-Quarter Earnings Preview   [Apr-17-17 04:49PM  TheStreet.com]
▶ HCA Annual Shareholders Meeting   [04:30PM  Business Wire]
Stock chart of HCA Financial statements of HCA
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

FREE DOWNLOAD
Follow us on:   twitter   twitter   twitter   twitter

VALUATION THEORY       ASSET ALLOCATION

About X-FIN       Site news       Privacy policy       Terms of use       FAQ

Copyright © X-FIN.com 2005-2017. All rigths reserved.