Intrinsic value of HCA Healthcare - HCA

Previous Close

$100.54

  Intrinsic Value

$33.99

stock screener

  Rating & Target

str. sell

-66%

Previous close

$100.54

 
Intrinsic value

$33.99

 
Up/down potential

-66%

 
Rating

str. sell

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

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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
  4.10
  4.19
  4.27
  4.34
  4.41
  4.47
  4.52
  4.57
  4.61
  4.65
  4.69
  4.72
  4.75
  4.77
  4.79
  4.81
  4.83
  4.85
  4.86
  4.88
  4.89
  4.90
  4.91
  4.92
  4.93
  4.94
  4.94
  4.95
  4.95
  4.96
Revenue, $m
  41,490
  43,191
  45,001
  46,923
  48,961
  51,120
  53,404
  55,819
  58,370
  61,062
  63,902
  66,897
  70,053
  73,377
  76,878
  80,564
  84,443
  88,524
  92,818
  97,333
  102,081
  107,074
  112,322
  117,839
  123,637
  129,730
  136,132
  142,860
  149,928
  157,354
  165,155
Variable operating expenses, $m
 
  22,691
  23,614
  24,594
  25,633
  26,734
  27,898
  29,129
  30,430
  31,802
  33,250
  34,107
  35,716
  37,411
  39,196
  41,075
  43,053
  45,133
  47,322
  49,625
  52,045
  54,591
  57,266
  60,079
  63,035
  66,142
  69,406
  72,836
  76,440
  80,226
  84,203
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
  36,590
  37,860
  39,197
  40,601
  42,076
  43,623
  45,248
  46,952
  48,737
  50,608
  51,899
  53,953
  56,104
  58,356
  60,714
  63,183
  65,766
  68,471
  71,303
  74,265
  77,366
  80,611
  84,007
  87,561
  91,281
  95,174
  99,248
  103,512
  107,975
  112,646
Operating income, $m
  6,440
  6,601
  7,141
  7,727
  8,361
  9,045
  9,781
  10,571
  11,418
  12,325
  13,294
  14,998
  16,100
  17,274
  18,523
  19,850
  21,261
  22,758
  24,346
  26,031
  27,816
  29,708
  31,711
  33,831
  36,075
  38,449
  40,958
  43,612
  46,416
  49,379
  52,509
EBITDA, $m
  8,406
  8,704
  9,303
  9,953
  10,654
  11,410
  12,222
  13,092
  14,024
  15,020
  16,083
  17,216
  18,423
  19,707
  21,072
  22,522
  24,060
  25,693
  27,424
  29,258
  31,201
  33,258
  35,435
  37,739
  40,175
  42,750
  45,472
  48,349
  51,387
  54,596
  57,985
Interest expense (income), $m
  1,666
  1,683
  1,152
  1,223
  1,297
  1,376
  1,460
  1,548
  1,642
  1,741
  1,845
  1,956
  2,072
  2,194
  2,323
  2,459
  2,602
  2,752
  2,911
  3,077
  3,252
  3,436
  3,630
  3,834
  4,048
  4,273
  4,509
  4,757
  5,018
  5,292
  5,580
Earnings before tax, $m
  4,810
  4,918
  5,988
  6,504
  7,064
  7,668
  8,321
  9,023
  9,776
  10,584
  11,448
  13,043
  14,028
  15,080
  16,200
  17,391
  18,659
  20,005
  21,436
  22,954
  24,564
  26,271
  28,081
  29,998
  32,027
  34,176
  36,450
  38,854
  41,398
  44,087
  46,929
Tax expense, $m
  1,378
  1,328
  1,617
  1,756
  1,907
  2,070
  2,247
  2,436
  2,640
  2,858
  3,091
  3,521
  3,788
  4,072
  4,374
  4,696
  5,038
  5,401
  5,788
  6,198
  6,632
  7,093
  7,582
  8,099
  8,647
  9,228
  9,841
  10,491
  11,177
  11,903
  12,671
Net income, $m
  2,890
  3,590
  4,371
  4,748
  5,156
  5,598
  6,074
  6,587
  7,137
  7,726
  8,357
  9,521
  10,241
  11,008
  11,826
  12,696
  13,621
  14,604
  15,648
  16,756
  17,932
  19,178
  20,499
  21,898
  23,380
  24,948
  26,608
  28,364
  30,220
  32,183
  34,258

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
  34,470
  35,914
  37,448
  39,075
  40,798
  42,621
  44,548
  46,584
  48,733
  50,999
  53,389
  55,908
  58,561
  61,355
  64,297
  67,393
  70,650
  74,076
  77,680
  81,470
  85,454
  89,643
  94,045
  98,672
  103,535
  108,645
  114,014
  119,655
  125,582
  131,807
Adjusted assets (=assets-cash), $m
  33,112
  34,470
  35,914
  37,448
  39,075
  40,798
  42,621
  44,548
  46,584
  48,733
  50,999
  53,389
  55,908
  58,561
  61,355
  64,297
  67,393
  70,650
  74,076
  77,680
  81,470
  85,454
  89,643
  94,045
  98,672
  103,535
  108,645
  114,014
  119,655
  125,582
  131,807
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
  16,326
  17,010
  17,737
  18,507
  19,323
  20,187
  21,100
  22,064
  23,081
  24,155
  25,287
  26,480
  27,737
  29,060
  30,453
  31,919
  33,462
  35,085
  36,792
  38,587
  40,474
  42,458
  44,543
  46,735
  49,038
  51,458
  54,001
  56,673
  59,480
  62,428
Working capital, $m
  3,252
  2,937
  3,060
  3,191
  3,329
  3,476
  3,631
  3,796
  3,969
  4,152
  4,345
  4,549
  4,764
  4,990
  5,228
  5,478
  5,742
  6,020
  6,312
  6,619
  6,942
  7,281
  7,638
  8,013
  8,407
  8,822
  9,257
  9,714
  10,195
  10,700
  11,231
Total debt, $m
  31,376
  21,339
  22,639
  24,020
  25,484
  27,034
  28,675
  30,410
  32,242
  34,175
  36,216
  38,366
  40,633
  43,021
  45,536
  48,183
  50,969
  53,901
  56,985
  60,228
  63,639
  67,225
  70,994
  74,957
  79,121
  83,498
  88,097
  92,929
  98,006
  103,339
  108,943
Total liabilities, $m
  41,060
  31,023
  32,323
  33,704
  35,168
  36,718
  38,359
  40,094
  41,926
  43,859
  45,900
  48,050
  50,317
  52,705
  55,220
  57,867
  60,653
  63,585
  66,669
  69,912
  73,323
  76,909
  80,678
  84,641
  88,805
  93,182
  97,781
  102,613
  107,690
  113,023
  118,627
Total equity, $m
  -7,302
  3,447
  3,591
  3,745
  3,908
  4,080
  4,262
  4,455
  4,658
  4,873
  5,100
  5,339
  5,591
  5,856
  6,136
  6,430
  6,739
  7,065
  7,408
  7,768
  8,147
  8,545
  8,964
  9,405
  9,867
  10,354
  10,865
  11,401
  11,966
  12,558
  13,181
Total liabilities and equity, $m
  33,758
  34,470
  35,914
  37,449
  39,076
  40,798
  42,621
  44,549
  46,584
  48,732
  51,000
  53,389
  55,908
  58,561
  61,356
  64,297
  67,392
  70,650
  74,077
  77,680
  81,470
  85,454
  89,642
  94,046
  98,672
  103,536
  108,646
  114,014
  119,656
  125,581
  131,808
Debt-to-equity ratio
  -4.297
  6.190
  6.300
  6.410
  6.520
  6.630
  6.730
  6.830
  6.920
  7.010
  7.100
  7.190
  7.270
  7.350
  7.420
  7.490
  7.560
  7.630
  7.690
  7.750
  7.810
  7.870
  7.920
  7.970
  8.020
  8.060
  8.110
  8.150
  8.190
  8.230
  8.270
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
  3,590
  4,371
  4,748
  5,156
  5,598
  6,074
  6,587
  7,137
  7,726
  8,357
  9,521
  10,241
  11,008
  11,826
  12,696
  13,621
  14,604
  15,648
  16,756
  17,932
  19,178
  20,499
  21,898
  23,380
  24,948
  26,608
  28,364
  30,220
  32,183
  34,258
Depreciation, amort., depletion, $m
  1,966
  2,103
  2,163
  2,226
  2,294
  2,365
  2,441
  2,521
  2,606
  2,695
  2,789
  2,218
  2,323
  2,433
  2,549
  2,671
  2,800
  2,935
  3,078
  3,227
  3,385
  3,550
  3,724
  3,907
  4,100
  4,302
  4,514
  4,737
  4,971
  5,218
  5,476
Funds from operations, $m
  2,438
  5,693
  6,534
  6,974
  7,450
  7,963
  8,515
  9,108
  9,743
  10,421
  11,147
  11,739
  12,564
  13,441
  14,375
  15,367
  16,421
  17,539
  18,726
  19,984
  21,317
  22,729
  24,223
  25,806
  27,480
  29,250
  31,122
  33,101
  35,192
  37,401
  39,734
Change in working capital, $m
  -3,215
  116
  123
  131
  139
  147
  155
  164
  173
  183
  193
  204
  215
  226
  238
  251
  264
  278
  292
  307
  323
  339
  357
  375
  394
  414
  435
  457
  481
  505
  530
Cash from operations, $m
  5,653
  5,577
  6,411
  6,844
  7,312
  7,817
  8,360
  8,944
  9,569
  10,238
  10,953
  11,536
  12,349
  13,215
  14,137
  15,116
  16,157
  17,262
  18,434
  19,677
  20,994
  22,389
  23,867
  25,431
  27,085
  28,836
  30,687
  32,643
  34,711
  36,896
  39,204
Maintenance CAPEX, $m
  0
  -1,376
  -1,432
  -1,492
  -1,556
  -1,623
  -1,695
  -1,771
  -1,851
  -1,935
  -2,025
  -2,119
  -2,218
  -2,323
  -2,433
  -2,549
  -2,671
  -2,800
  -2,935
  -3,078
  -3,227
  -3,385
  -3,550
  -3,724
  -3,907
  -4,100
  -4,302
  -4,514
  -4,737
  -4,971
  -5,218
New CAPEX, $m
  -2,760
  -643
  -684
  -727
  -770
  -816
  -863
  -913
  -964
  -1,018
  -1,074
  -1,132
  -1,193
  -1,257
  -1,323
  -1,393
  -1,466
  -1,543
  -1,623
  -1,707
  -1,795
  -1,887
  -1,984
  -2,085
  -2,192
  -2,303
  -2,420
  -2,543
  -2,672
  -2,807
  -2,949
Cash from investing activities, $m
  -3,240
  -2,019
  -2,116
  -2,219
  -2,326
  -2,439
  -2,558
  -2,684
  -2,815
  -2,953
  -3,099
  -3,251
  -3,411
  -3,580
  -3,756
  -3,942
  -4,137
  -4,343
  -4,558
  -4,785
  -5,022
  -5,272
  -5,534
  -5,809
  -6,099
  -6,403
  -6,722
  -7,057
  -7,409
  -7,778
  -8,167
Free cash flow, $m
  2,413
  3,558
  4,295
  4,625
  4,985
  5,377
  5,802
  6,260
  6,754
  7,285
  7,855
  8,285
  8,938
  9,636
  10,380
  11,174
  12,019
  12,919
  13,876
  14,892
  15,971
  17,117
  18,332
  19,621
  20,986
  22,433
  23,965
  25,586
  27,302
  29,118
  31,037
Issuance/(repayment) of debt, $m
  815
  -9,821
  1,300
  1,381
  1,464
  1,551
  1,641
  1,734
  1,832
  1,934
  2,040
  2,151
  2,267
  2,388
  2,515
  2,647
  2,786
  2,932
  3,084
  3,243
  3,411
  3,586
  3,770
  3,962
  4,165
  4,377
  4,599
  4,832
  5,077
  5,334
  5,603
Issuance/(repurchase) of shares, $m
  -2,751
  7,589
  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
  -2,232
  1,300
  1,381
  1,464
  1,551
  1,641
  1,734
  1,832
  1,934
  2,040
  2,151
  2,267
  2,388
  2,515
  2,647
  2,786
  2,932
  3,084
  3,243
  3,411
  3,586
  3,770
  3,962
  4,165
  4,377
  4,599
  4,832
  5,077
  5,334
  5,603
Total cash flow (excl. dividends), $m
  -95
  1,326
  5,595
  6,005
  6,449
  6,928
  7,442
  7,995
  8,586
  9,219
  9,895
  10,436
  11,205
  12,024
  12,895
  13,821
  14,806
  15,851
  16,959
  18,135
  19,382
  20,703
  22,102
  23,583
  25,151
  26,810
  28,564
  30,419
  32,379
  34,451
  36,641
Retained Cash Flow (-), $m
  -297
  -11,179
  -144
  -153
  -163
  -172
  -182
  -193
  -204
  -215
  -227
  -239
  -252
  -265
  -279
  -294
  -310
  -326
  -343
  -360
  -379
  -398
  -419
  -440
  -463
  -486
  -511
  -537
  -564
  -593
  -623
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
 
  -9,423
  5,450
  5,852
  6,287
  6,756
  7,260
  7,802
  8,383
  9,004
  9,669
  10,197
  10,953
  11,758
  12,616
  13,527
  14,496
  15,525
  16,617
  17,775
  19,003
  20,305
  21,683
  23,143
  24,688
  26,323
  28,053
  29,882
  31,815
  33,859
  36,018
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
 
  -8,398
  4,283
  4,008
  3,706
  3,384
  3,047
  2,703
  2,360
  2,026
  1,708
  1,388
  1,127
  895
  695
  527
  390
  280
  196
  134
  88
  56
  35
  21
  12
  7
  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 Healthcare, Inc., formerly HCA Holdings, Inc., is a holding company. The Company, through its subsidiaries, owns and operates hospitals and related healthcare entities. As of December 31, 2016, the Company operated in two geographically organized groups, including the National and American Groups. As of December 31, 2016, the National Group included 84 hospitals, which were located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, South Carolina, Utah and Virginia. As of December 31, 2016, the American Group included 80 hospitals, which were located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas. As of December 31, 2016, the Company operated six hospitals in England. The Company owns, manages or operates hospitals, freestanding surgery centers and freestanding emergency care facilities, walk-in clinics, diagnostic and imaging centers, among others.

FINANCIAL RATIOS  of  HCA Healthcare (HCA)

Valuation Ratios
P/E Ratio 12.9
Price to Sales 0.9
Price to Book -5.1
Price to Tangible Book
Price to Cash Flow 6.6
Price to Free Cash Flow 12.9
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 Healthcare. The default revenue input number comes from 2016 income statement of HCA Healthcare. 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 4.1% 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 Healthcare, 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 Healthcare.
    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 Healthcare.

Corporate tax rate of 27% is the nominal tax rate for HCA Healthcare. 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 Healthcare 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 Healthcare - 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 363.16 million for HCA Healthcare 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 Healthcare at the current share price and the inputted number of shares is $36.5 billion.

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COMPANY NEWS

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▶ HCA Healthcare Turns on Its Dividend Spigot   [Jan-31-18 09:28AM  Motley Fool]
▶ HCA beats Street 4Q forecasts   [09:12AM  Associated Press]
▶ HCA to Present at February Healthcare Conferences   [Jan-26-18 05:31PM  Business Wire]
▶ Where Amazon and Municipal Bond Finance Collide   [Jan-24-18 12:21PM  Market Exclusive]
▶ HCA 4th Quarter 2017 Earnings Conference Call   [Jan-17-18 05:00PM  Business Wire]
▶ HCA Holdings Getting Closer To Key Technical Benchmark   [Dec-19-17 03:00AM  Investor's Business Daily]
▶ HCA names new CEO and COO of recently acquired Houston-area hospitals   [Dec-11-17 01:55PM  American City Business Journals]
▶ CVS buys Aetna for $69B   [Dec-04-17 10:56AM  Yahoo Finance Video]
▶ HCA to build freestanding ER on Millenia site   [Nov-28-17 03:55PM  American City Business Journals]
▶ University of Houston approves medical school   [Nov-22-17 04:35PM  American City Business Journals]
▶ University of Houston to set up its own medical school   [Nov-17-17 02:05PM  American City Business Journals]
▶ Museum District hospital that recently changed hands names new CEO   [Nov-15-17 09:20AM  American City Business Journals]
▶ 9 Stocks Outperforming by Investing in Growth: Goldman   [Nov-03-17 08:00AM  Investopedia]
▶ HCA meets 3Q profit forecasts   [08:43AM  Associated Press]
▶ HCA Reports Third Quarter 2017 Results   [08:30AM  Business Wire]
▶ Health system's bid for new Brentwood facility could be over   [03:58PM  American City Business Journals]
▶ CEO of Denver hospital steps down after 21 years   [Oct-27-17 06:15PM  American City Business Journals]
▶ CVS in talks to buy Aetna: RPTS   [10:31AM  Yahoo Finance Video]
▶ New Strong Sell Stocks for October 24th   [Oct-24-17 08:57AM  Zacks]
▶ HCA Previews 2017 Third Quarter Results   [04:30PM  Business Wire]
▶ HCA pays $22M for site to build hospital near Nova Southeastern University   [Oct-17-17 02:10PM  American City Business Journals]
▶ Healthcare Reform: Insurers Feel the Pain   [12:59PM  Barrons.com]
▶ Whats Moving Tenet Healthcare Corp (THC) Stock Today?   [Sep-14-17 02:50PM  InvestorPlace]
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.

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