Universal Health Services, Inc. (NYSE:UHS) received a lot of attention from a substantial price increase on the NYSE over the last few months. The recent jump in the share price has meant that the company is trading at close to its 52-week high. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Universal Health Services's outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for Universal Health Services
What's The Opportunity In Universal Health Services?
Good news, investors! Universal Health Services is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. We've used the price-to-earnings ratio in this instance because there's not enough visibility to forecast its cash flows. The stock's ratio of 15.84x is currently well-below the industry average of 23.55x, meaning that it is trading at a cheaper price relative to its peers. What's more interesting is that, Universal Health Services's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Universal Health Services?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. Universal Health Services' earnings over the next few years are expected to increase by 32%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? Since UHS is currently below the industry PE ratio, it may be a great time to increase your holdings in the stock. With a positive outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.
Are you a potential investor? If you've been keeping an eye on UHS for a while, now might be the time to make a leap. Its buoyant future profit outlook isn't fully reflected in the current share price yet, which means it's not too late to buy UHS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Every company has risks, and we've spotted 1 warning sign for Universal Health Services you should know about.
If you are no longer interested in Universal Health Services, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.