ZACKS·2025-12-18 18:21Core Insights - Universal Health Services, Inc. (UHS) is identified as a compelling value play in the medical facilities sector, trading at a forward earnings multiple of 9.62X, which is below its five-year median of 11.70X and the industry average of 10.84X [1][6] - UHS has a Value Score of A, indicating strong appeal to valuation-conscious investors [2] Share Price Performance - UHS has seen a share price increase of 26.7% over the past year, outperforming the industry growth of 22.1% and the S&P 500's rise of 16.3% [4] - Despite trailing behind Tenet Healthcare Corporation (THC) and HCA Healthcare, Inc. (HCA) in returns, UHS has still achieved significant gains, reflecting improving fundamentals and investor confidence [4] Financial Metrics - UHS's forward P/E ratio of 9.62X is lower than major peers, with rising admissions and patient days supporting revenue growth [6] - Adjusted net margins have expanded from 5.2% in 2023 to 7.1% in 2024 and further to 8.1% in Q3 2025, indicating operational leverage [10] Revenue Growth - UHS has experienced steady revenue growth across its Acute Care Hospital Services and Behavioral Health Care Services segments, with adjusted admissions increasing by 6.5% in 2023 and projected growth of 3.8% in 2024 [9] - Adjusted patient days in the Behavioral Health segment rose by 1.7% in 2023 and 1.6% in 2024, demonstrating stable demand [9] Cash Flow and Shareholder Returns - UHS generated $525 million in free cash flow in 2023, $1.1 billion in 2024, and $537 million in the first nine months of 2025, with a conservative long-term debt-to-capital ratio of 35.7% [11] - The company has repurchased approximately 36% of its outstanding shares since 2019, with buybacks totaling $525 million in 2023 and $598.5 million in 2024 [12] Earnings Estimates - The Zacks Consensus Estimate for 2025 adjusted earnings is $21.83 per share, indicating a year-over-year growth of 31.4%, with a projected 7.4% increase in 2026 [13] - Revenue estimates imply growth of 9.7% in 2025 and 5.2% in 2026, with UHS exceeding earnings expectations in the past four quarters, delivering an average surprise of 15.2% [14][13] Analyst Sentiment - Analysts suggest additional upside for UHS shares, which currently trade below the average price target of $252.18, indicating potential upside of approximately 12.1% [15] - Target estimates range from $190 to $302, reflecting varying risk assumptions, but the overall outlook remains positive [15] Conclusion - UHS is well-positioned for investors seeking value with improving fundamentals, supported by discounted valuation, consistent volume growth, expanding margins, and strong free cash flow generation [16] - The company has a conservative balance sheet and an aggressive share repurchase program, enhancing shareholder returns [16]