Universal Health Services, Inc. (NYSE:UHS) saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. The company's trading levels have approached the yearly peak, following the recent bounce in the share price. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let's take a look at Universal Health Services's outlook and value based on the most recent financial data to see if the opportunity still exists.
What Is Universal Health Services Worth?
Great news for investors – Universal Health Services is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Universal Health Services's ratio of 14.6x is below its peer average of 26.85x, which indicates the stock is trading at a lower price compared to the Healthcare industry. Although, there may be another chance to buy again in the future. This is because Universal Health Services's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Universal Health Services generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 31% over the next couple of years, the future seems bright for Universal Health Services. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
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 accumulate more of your holdings in the stock. With an optimistic 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 strength of its balance sheet, in order to make a well-informed assessment.
If you'd like to know more about Universal Health Services as a business, it's important to be aware of any risks it's facing. Case in point: We've spotted 2 warning signs for Universal Health Services you should be aware of.
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.