Intrinsic value of HCA Holdings - HCA

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$86.24

  Intrinsic Value

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  Value-price divergence*

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$86.24

 
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*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 31.7

 

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
  3.80
  3.92
  4.03
  4.13
  4.21
  4.29
  4.36
  4.43
  4.48
  4.54
  4.58
  4.62
  4.66
  4.69
  4.73
  4.75
  4.78
  4.80
  4.82
  4.84
  4.85
  4.87
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
Revenue, $m
  41,490
  43,067
  44,755
  46,558
  48,478
  50,520
  52,688
  54,987
  57,421
  59,995
  62,716
  65,589
  68,622
  71,820
  75,192
  78,745
  82,488
  86,429
  90,577
  94,943
  99,536
  104,368
  109,449
  114,793
  120,410
  126,315
  132,522
  139,046
  145,901
  153,104
  160,673
Variable operating expenses, $m
 
  22,628
  23,488
  24,407
  25,387
  26,428
  27,533
  28,705
  29,946
  31,258
  32,646
  33,440
  34,986
  36,617
  38,336
  40,148
  42,056
  44,065
  46,180
  48,406
  50,748
  53,211
  55,802
  58,526
  61,390
  64,401
  67,565
  70,891
  74,386
  78,059
  81,918
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
  36,527
  37,734
  39,010
  40,355
  41,770
  43,258
  44,824
  46,468
  48,193
  50,004
  51,232
  53,223
  55,310
  57,496
  59,787
  62,186
  64,698
  67,329
  70,084
  72,968
  75,986
  79,147
  82,454
  85,916
  89,540
  93,333
  97,303
  101,458
  105,808
  110,361
Operating income, $m
  6,440
  6,540
  7,020
  7,548
  8,124
  8,751
  9,430
  10,163
  10,953
  11,802
  12,712
  14,357
  15,399
  16,511
  17,696
  18,959
  20,302
  21,731
  23,248
  24,859
  26,569
  28,382
  30,303
  32,338
  34,494
  36,775
  39,189
  41,742
  44,442
  47,296
  50,312
EBITDA, $m
  8,406
  8,638
  9,174
  9,762
  10,402
  11,096
  11,847
  12,657
  13,528
  14,462
  15,462
  16,532
  17,674
  18,892
  20,189
  21,570
  23,037
  24,597
  26,252
  28,008
  29,869
  31,842
  33,932
  36,145
  38,486
  40,963
  43,583
  46,353
  49,280
  52,373
  55,640
Interest expense (income), $m
  1,666
  1,683
  1,147
  1,213
  1,283
  1,357
  1,437
  1,521
  1,610
  1,704
  1,804
  1,910
  2,021
  2,139
  2,263
  2,394
  2,531
  2,677
  2,829
  2,990
  3,160
  3,338
  3,525
  3,722
  3,930
  4,147
  4,376
  4,617
  4,870
  5,136
  5,416
Earnings before tax, $m
  4,810
  4,857
  5,873
  6,335
  6,841
  7,393
  7,993
  8,643
  9,343
  10,098
  10,908
  12,448
  13,378
  14,372
  15,433
  16,565
  17,771
  19,054
  20,419
  21,869
  23,409
  25,044
  26,778
  28,616
  30,564
  32,628
  34,812
  37,125
  39,572
  42,160
  44,897
Tax expense, $m
  1,378
  1,312
  1,586
  1,710
  1,847
  1,996
  2,158
  2,333
  2,523
  2,726
  2,945
  3,361
  3,612
  3,880
  4,167
  4,473
  4,798
  5,145
  5,513
  5,905
  6,321
  6,762
  7,230
  7,726
  8,252
  8,809
  9,399
  10,024
  10,684
  11,383
  12,122
Net income, $m
  2,890
  3,546
  4,287
  4,624
  4,994
  5,397
  5,835
  6,309
  6,821
  7,371
  7,963
  9,087
  9,766
  10,492
  11,266
  12,093
  12,973
  13,910
  14,906
  15,965
  17,089
  18,282
  19,548
  20,890
  22,312
  23,818
  25,413
  27,101
  28,887
  30,777
  32,775

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
  34,371
  35,718
  37,157
  38,690
  40,320
  42,050
  43,884
  45,826
  47,881
  50,053
  52,346
  54,766
  57,319
  60,010
  62,845
  65,832
  68,978
  72,288
  75,773
  79,439
  83,295
  87,350
  91,614
  96,097
  100,810
  105,764
  110,970
  116,441
  122,190
  128,231
Adjusted assets (=assets-cash), $m
  33,112
  34,371
  35,718
  37,157
  38,690
  40,320
  42,050
  43,884
  45,826
  47,881
  50,053
  52,346
  54,766
  57,319
  60,010
  62,845
  65,832
  68,978
  72,288
  75,773
  79,439
  83,295
  87,350
  91,614
  96,097
  100,810
  105,764
  110,970
  116,441
  122,190
  128,231
Revenue / Adjusted assets
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
  1.253
Average production assets, $m
  15,683
  16,279
  16,917
  17,599
  18,325
  19,097
  19,916
  20,785
  21,705
  22,678
  23,707
  24,793
  25,939
  27,148
  28,423
  29,766
  31,180
  32,670
  34,238
  35,889
  37,625
  39,451
  41,372
  43,392
  45,515
  47,747
  50,093
  52,559
  55,151
  57,873
  60,734
Working capital, $m
  3,252
  2,929
  3,043
  3,166
  3,297
  3,435
  3,583
  3,739
  3,905
  4,080
  4,265
  4,460
  4,666
  4,884
  5,113
  5,355
  5,609
  5,877
  6,159
  6,456
  6,768
  7,097
  7,443
  7,806
  8,188
  8,589
  9,012
  9,455
  9,921
  10,411
  10,926
Total debt, $m
  31,376
  21,250
  22,462
  23,757
  25,137
  26,604
  28,161
  29,812
  31,560
  33,409
  35,363
  37,427
  39,605
  41,903
  44,325
  46,877
  49,565
  52,396
  55,376
  58,511
  61,811
  65,281
  68,931
  72,769
  76,804
  81,045
  85,504
  90,189
  95,113
  100,287
  105,724
Total liabilities, $m
  41,060
  30,934
  32,146
  33,441
  34,821
  36,288
  37,845
  39,496
  41,244
  43,093
  45,047
  47,111
  49,289
  51,587
  54,009
  56,561
  59,249
  62,080
  65,060
  68,195
  71,495
  74,965
  78,615
  82,453
  86,488
  90,729
  95,188
  99,873
  104,797
  109,971
  115,408
Total equity, $m
  -7,302
  3,437
  3,572
  3,716
  3,869
  4,032
  4,205
  4,388
  4,583
  4,788
  5,005
  5,235
  5,477
  5,732
  6,001
  6,285
  6,583
  6,898
  7,229
  7,577
  7,944
  8,329
  8,735
  9,161
  9,610
  10,081
  10,576
  11,097
  11,644
  12,219
  12,823
Total liabilities and equity, $m
  33,758
  34,371
  35,718
  37,157
  38,690
  40,320
  42,050
  43,884
  45,827
  47,881
  50,052
  52,346
  54,766
  57,319
  60,010
  62,846
  65,832
  68,978
  72,289
  75,772
  79,439
  83,294
  87,350
  91,614
  96,098
  100,810
  105,764
  110,970
  116,441
  122,190
  128,231
Debt-to-equity ratio
  -4.297
  6.180
  6.290
  6.390
  6.500
  6.600
  6.700
  6.790
  6.890
  6.980
  7.070
  7.150
  7.230
  7.310
  7.390
  7.460
  7.530
  7.600
  7.660
  7.720
  7.780
  7.840
  7.890
  7.940
  7.990
  8.040
  8.080
  8.130
  8.170
  8.210
  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
  3,546
  4,287
  4,624
  4,994
  5,397
  5,835
  6,309
  6,821
  7,371
  7,963
  9,087
  9,766
  10,492
  11,266
  12,093
  12,973
  13,910
  14,906
  15,965
  17,089
  18,282
  19,548
  20,890
  22,312
  23,818
  25,413
  27,101
  28,887
  30,777
  32,775
Depreciation, amort., depletion, $m
  1,966
  2,098
  2,154
  2,214
  2,278
  2,346
  2,417
  2,494
  2,574
  2,660
  2,750
  2,175
  2,275
  2,381
  2,493
  2,611
  2,735
  2,866
  3,003
  3,148
  3,300
  3,461
  3,629
  3,806
  3,993
  4,188
  4,394
  4,610
  4,838
  5,077
  5,328
Funds from operations, $m
  2,438
  5,644
  6,441
  6,838
  7,272
  7,743
  8,252
  8,803
  9,395
  10,031
  10,713
  11,262
  12,041
  12,873
  13,760
  14,704
  15,708
  16,775
  17,909
  19,113
  20,389
  21,743
  23,177
  24,696
  26,304
  28,007
  29,807
  31,712
  33,725
  35,853
  38,102
Change in working capital, $m
  -3,215
  107
  115
  123
  131
  139
  147
  156
  165
  175
  185
  195
  206
  217
  229
  242
  255
  268
  282
  297
  312
  329
  346
  363
  382
  402
  422
  444
  466
  490
  515
Cash from operations, $m
  5,653
  6,206
  6,327
  6,716
  7,141
  7,604
  8,105
  8,646
  9,230
  9,856
  10,528
  11,066
  11,835
  12,655
  13,530
  14,462
  15,453
  16,507
  17,627
  18,816
  20,077
  21,414
  22,831
  24,333
  25,922
  27,605
  29,385
  31,268
  33,259
  35,364
  37,587
Maintenance CAPEX, $m
  0
  -1,376
  -1,428
  -1,484
  -1,544
  -1,607
  -1,675
  -1,747
  -1,823
  -1,904
  -1,989
  -2,080
  -2,175
  -2,275
  -2,381
  -2,493
  -2,611
  -2,735
  -2,866
  -3,003
  -3,148
  -3,300
  -3,461
  -3,629
  -3,806
  -3,993
  -4,188
  -4,394
  -4,610
  -4,838
  -5,077
New CAPEX, $m
  -2,760
  -596
  -638
  -681
  -726
  -772
  -820
  -869
  -920
  -973
  -1,028
  -1,086
  -1,146
  -1,209
  -1,275
  -1,343
  -1,415
  -1,490
  -1,568
  -1,650
  -1,736
  -1,826
  -1,921
  -2,020
  -2,123
  -2,232
  -2,346
  -2,466
  -2,591
  -2,723
  -2,861
Cash from investing activities, $m
  -3,240
  -1,972
  -2,066
  -2,165
  -2,270
  -2,379
  -2,495
  -2,616
  -2,743
  -2,877
  -3,017
  -3,166
  -3,321
  -3,484
  -3,656
  -3,836
  -4,026
  -4,225
  -4,434
  -4,653
  -4,884
  -5,126
  -5,382
  -5,649
  -5,929
  -6,225
  -6,534
  -6,860
  -7,201
  -7,561
  -7,938
Free cash flow, $m
  2,413
  4,234
  4,260
  4,550
  4,871
  5,224
  5,610
  6,031
  6,486
  6,979
  7,510
  7,900
  8,514
  9,171
  9,874
  10,626
  11,428
  12,283
  13,193
  14,162
  15,193
  16,287
  17,450
  18,684
  19,993
  21,380
  22,851
  24,408
  26,057
  27,803
  29,650
Issuance/(repayment) of debt, $m
  815
  -9,910
  1,213
  1,295
  1,380
  1,467
  1,557
  1,651
  1,748
  1,849
  1,954
  2,064
  2,178
  2,297
  2,422
  2,552
  2,688
  2,831
  2,980
  3,136
  3,299
  3,470
  3,650
  3,838
  4,035
  4,242
  4,458
  4,686
  4,924
  5,174
  5,436
Issuance/(repurchase) of shares, $m
  -2,751
  16,415
  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
  6,505
  1,213
  1,295
  1,380
  1,467
  1,557
  1,651
  1,748
  1,849
  1,954
  2,064
  2,178
  2,297
  2,422
  2,552
  2,688
  2,831
  2,980
  3,136
  3,299
  3,470
  3,650
  3,838
  4,035
  4,242
  4,458
  4,686
  4,924
  5,174
  5,436
Total cash flow (excl. dividends), $m
  -95
  -5,676
  5,473
  5,845
  6,251
  6,691
  7,168
  7,681
  8,234
  8,828
  9,464
  9,964
  10,692
  11,468
  12,296
  13,178
  14,116
  15,113
  16,173
  17,298
  18,492
  19,758
  21,100
  22,522
  24,028
  25,622
  27,309
  29,094
  30,981
  32,977
  35,086
Retained Cash Flow (-), $m
  -297
  -11,169
  -135
  -144
  -153
  -163
  -173
  -183
  -194
  -205
  -217
  -229
  -242
  -255
  -269
  -284
  -299
  -315
  -331
  -348
  -367
  -386
  -406
  -426
  -448
  -471
  -495
  -521
  -547
  -575
  -604
Prev. year cash balance distribution, $m
 
  430
  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
 
  0
  5,338
  5,701
  6,098
  6,528
  6,995
  7,498
  8,040
  8,623
  9,247
  9,735
  10,450
  11,213
  12,027
  12,894
  13,817
  14,799
  15,842
  16,950
  18,125
  19,372
  20,694
  22,095
  23,579
  25,151
  26,814
  28,573
  30,434
  32,402
  34,482
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
 
  0
  4,195
  3,904
  3,595
  3,270
  2,935
  2,598
  2,264
  1,940
  1,634
  1,326
  1,075
  854
  663
  502
  371
  267
  187
  127
  84
  54
  33
  20
  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 11.1
Price to Sales 0.8
Price to Book -4.4
Price to Tangible Book
Price to Cash Flow 5.7
Price to Free Cash Flow 11
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 3.8% 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 $31.7 billion.


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COMPANY NEWS

▶ 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]
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▶ 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]
▶ Why HCA Holdings Stock Tumbled Monday   [12:10PM  24/7 Wall St.]
▶ HCA Previews 2017 First Quarter Results   [08:30AM  Business Wire]
▶ New top doctor named to Kingwood Medical Center   [Apr-11-17 10:00AM  American City Business Journals]
▶ Wall Street Week Ahead: Is Chaos the New Normal?   [Apr-08-17 10:56AM  TheStreet.com]
▶ Nasdaq Scores New High; Is The Uptrend Back?   [Apr-05-17 01:37PM  Investor's Business Daily]
▶ TrumpCare Is Back: Dow Inches Ahead As Pivot To Tax Cuts Is Put On Hold   [Apr-04-17 05:14PM  Investor's Business Daily]
▶ 10 Most Profitable For Profit Hospitals in America   [Mar-31-17 05:05PM  Insider Monkey]
▶ 10 Most Profitable For Profit Hospitals in America   [05:05PM  at Insider Monkey]
Stock chart of HCA Financial statements of HCA Annual reports 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.

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