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Cursory Analysis Of HCA Holdings

|Includes: HCA Holdings, Inc. (HCA)

The Hospital stocks are in the news. CYH and THC have collapsed due to their high leverage and there seems to be pressure on admissions, Emergency room visits, Surgery volumes, reimbursement from Obamacare etc.

Looking very briefly at HCA Holdings financials is quite telling. Let's look at 2016 guidance:

Revenue of $41 to $42 billion.

Adjusted EBITDA between $8.1 to $8.3 billion.

Adjusted EPS between $6.4 to $6.7

CAPEX for 2016 around $2.7 billion

The market is not giving HCA a high multiple at all. 11X 2016 guidance.

The company has a lot of debt, as do all hospital stocks. $31.5b of debt. Now CAPEX at $2.7b compared to revenues of $42b seems low, but remember debt represents upfront CAPEX of sorts. So this is not a low CAPEX business.

HCA seems to be best in breed and a market leader in terms of margins.

But the general model for these hospitals is generally capital intensive in nature and one that operates on low margins.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.