Hospital Corporation of America HCA Stock Analysis: Since 2016, HCA Stock has been climbing and is approaching its all-time high. Will it break through this invisible ceiling, or is there a dip coming that we can possibly take advantage of. Let’s take a look!
My colleague Anthony had written an interesting piece on United Health and after dabbling in food and retail, I thought it might be interesting to take a look at another healthcare stock that participates a little bit differently in the United States healthcare system. (By the way – when Antony wrote about UNH Stock it was 211. It’s now trading at 238 – almost a 13% return if you were able to act!)
If you’ve not heard of Hospital Corporation of America HCA Stock, you may have been in one of their operations. HCA is a for-profit operator of healthcare facilities that manages 177 Hospitals and 119 surgery centers in 20 U.S. states and the United Kingdom.
With healthcare a constant source of discussion in U.S. Politics, let’s take a look at the data using the IDDA process and see if this is worth adding to our portfolio. Remember: we want to invest, not speculate.
Good to Know: Unlike many of the other stocks we’ve profiled, HCA Stock does NOT pay a dividend.
1- Fundamental Points: Healthcare Corporation of America HCA Stock
HCA (NYSE) was founded in 1968 by Dr. Thomas Frist Sr., Dr. Thomas Frist Jr., and Jack Massey in Nashville, Tennessee. Their mission and values statement follows:
“Above all else, we are committed to the care and improvement of human life.
In pursuit of our mission, we believe the following value statements are essential and timeless:
We recognize and affirm the unique and intrinsic worth of each individual.
We treat all those we serve with compassion and kindness.
We trust our colleagues as valuable members of our healthcare team and pledge to treat one another with loyalty, respect, and dignity.
We act with absolute honesty, integrity, and fairness in the way we conduct our business and the way we live our lives.”
Pretty boilerplate, if you ask me. Additionally, very broad, it doesn’t really pin down what they actually do.
So what does HCA do? Well, to put it simply, they manage the operations of many hospitals and surgery centers. One can safely assume (as they are the largest publicly traded Hospital Management Organization) that they use their reach and leverage to negotiate competitive rates on their supply chains, standardize operations and approaches to care and provide influence on the political front.
One anecdotal piece of evidence I can cite is from my previous experience working at an independent blood center. In the area in which I live, there are several hospitals managed by HCA. Being based in Tennesee, HCA was looking for the lowest priced, quality blood products for their entire supply chain. That meant that, although our hospitals were local to us (the supplier), HCA searched on a national level for a supplier/distributor. While that was a threat to the company I was in, that’s solid business practice when you’re managing your own operation.
HCA employees roughly 240,000 people of which 37,000 are physicians and 80,000 are nurses. The process over 27 million patient encounters annually and have been voted one of the world’s moth ethical companies eight years running.
Knowing a little bit more about the operations, we’ll now take a look at some high-level numbers.
- Current Price: 90.11
- 52 Week Range: 71.18-91.03
- PE Ratio: 12.72
- EPS: 7.05
- Price 5 yrs ago: 37.09(142% return over 5 years)
- Short % of Float: 4.84%
- ROE: N/A (Return on Assets is 10.80%)
If you were brave enough 5 years ago to enter HCA in light of all the healthcare debate, you would have more than doubled your initial investment (just by holding). However, before we continue let me plug Kiana’s Investing Group. She does more than just pick a few stocks or cryptocurrencies and tells you when to buy. She and other group members are helping you manage risk, know when to enter and when to exit positions. Check it out!
HCA Stock – The Competition
Per Morningstar, HCA Stock is competing against these companies:
- Fresenius (Trading at around $55/share)
- DaVita (recently acquired by UNH by the way – until merger complete, trading at around $79/share)
- IHH Healthcare (trading at around $1.28/share)
IHH is a Malaysian stock for the record.
What are they doing right?
Well, here’s the thing – I’m not really sure. I mean, the stock is up 15% in the past year which is awesome, but if you take a look at their recent history, I can’t tell why Wall Street has been bullish on HCA. Their revenue has remained stagnant between 10.6 and 10.7 billion quarterly.
HCA Stock’s cost of revenue has decreased a bit (roughly 5%), but in past history I haven’t seen a cut that small lead to a 15% annual return. So it must be their earnings, right?
Well…they had one decent earnings report and since December 2016 have either only met or missed earnings. So to be honest, I don’t really get it. (Author’s note: I just checked for news on HCA stock and it broke through a resistance ceiling and I can’t, for the life of me, understand what’s pushing it forward!)
Good to Know: HCA stock will announce earnings January 30, 2018.
I know you all would probably prefer more sound analysis, but what it boils down to is that HCA operates at a fairly consistent level and has so for quite some time. Since August of 2011, HCA has had a fairly consistent rise while navigating the uncertainty in healthcare. They continue to seek acquisitions to increase their footprint which would then subsequently increase revenue. Additionally, 78% of their hospitals are recognized for providing top quality care by the Joint Commission (an American regulatory body). Therefore, they are utilizing sound operational practices, navigating uncertain waters, and delivering on expectations to Wall Street. Onto technical points.
2- Technical Points: HCA Stock
For our second point of IDDA we’ll look at HCA’s technicals. HCA approaching a historic high.
Overall in the past 5 years, HCA has been climbing. In 2015, HCA was facing litigation around stock abuse during its Initial Public Offering (IPO) and that negative press along with potential subpar earnings results led to it’s decline. Now, that decline should have only worried you if you bought HCA in April/May of 2015. But since you follow Kiana, you’ll know how to mitigate risks like the one HCA presented above.
Now we’ll add a few of our favorite indicators – the Ichimoku cloud and Fibonacci analysis.
Learn about Ichimoku: Get Ichimoku Secrets eBook
The Fibonacci analysis shows immediate support set at 86.65. Hwever, the Ichimoku cloud indicates a continued bull run and could keep the stock trading at $88 or more in the near future. With earnings being reported in the next 12 days, the stock could push through its current resistance ceiling or present a new buying opportunity.
Now I’ll add my own personal favorite indicators to see if the picture is any clearer.
3- Market Sentiment: HCA Stock
So despite my inability to understand WHY HCA continues to climb, we do have a solid compay who’s been keeping investors and analysis fairly happy in the past year. Let’s see if options traders will give us any indication as to what may happen next with HCA stock.
While appearing bearish, the RSI indicator should paint a cautious picture
Right now, the MacD is painting a bullish picture with the blue line moving up and across the yellow line. However, the MacD is reacting to today’s news in which the stock crept up to $90/share. The RSI and CCI indicators could be telling us that the stock is overbought and an overbought stock tends to fall. If you want my guess – the stock will continue to climb until earnings and that report will indicate the next shift. For what it’s worth, almost 60% of analysts are expecting HCA to beat earnings.
Healthcare Corporation of America HCA Stock – Investing Strategy
I’m on the fence when it comes to HCA. I’m not really wowed by it, especially since I have other holdings in healthcare (including UNH stock). However, I do think we have an immediate opportunity if we act quickly on HCA, but I wouldn’t fault you if you waited for the earnings report. Remember it’s up to you to calculate your risk tolerance before deciding on the investment strategy that is suitable for your portfolio. If you feel like you’re struggling reading the charts or keeping up with the terms, I highly suggest taking a free master class to learn more!
Of note, HCA Stock’s beta is 0.22 – which means it is 78% less volatile than the market.
As always, we provide Invest Diva’s calculations for important approximate levels, with regards to the HCA Stock analysis.