• Do the company fundamentals support steady growth?
  • Does a highly levered financial structure make the HCA Healthcare stock risky?
  • Will HCA Healthcare’s strategic investments and innovations outplay the competition?

The Company:

HCA Healthcare, Inc. (HCA) is one of the leading health care services companies in the United States. It operates hospitals in both USA and UK.

The company has been on the forefront of expansion in the hospital sector. The company CEO Sam Hazen said. “The environment is presenting opportunities for us to make sizable acquisitions. I think some of these are once-in-a-lifetime type opportunities and it’s important for the company to consider them, I think very carefully.” (Reference

The company fundamentals are very strong and expansion into new markets adds to the stock’s bullish sentiment.

Reason for Growth

The three core factors that will propel HCA Healthcare’s growth are:

  • Strong cash inflows and sound fundamentals
  • Huge market share compared to its competitors
  • Investments in care delivery points such as urgent care centers, emergency rooms and outpatient centers.

We will deep dive into these three factors to see how they will impact the company and its stock.

Strong Cash Flows and Sound Fundamentals

HCA Healthcare’s primary sources of cash are cash flow from operating activities, issuance of debt and equity securities and dispositions of hospitals and other centers. The important thing to note here is that the cash flow from operations is a huge $6.76 billion, which is an increase of $1.335 billion or 25% over the previous year. This cash flow lets HCA Healthcare:

  • Re-pay the principal and interest on its debt, thus making HCA Healthcare a less levered company.
  • Be cash sufficient during tough economic conditions.
  • Make strategic acquisitions and expand into new geographies.
  • Pay dividends.

Due to the strong cash flow, HCA Healthcare is able to grow at a tremendous pace. Its 2018 revenue were up 7% on a consolidated basis due to volume growth in same facility admissions, inpatient/outpatient surgical centers and emergency room visits. The increase in volume will continue to grow since the company has been expanding into new geographies with increasing number of people needing medical services.

HCA Healthcare raised its 2019 revenue guidance from $50.5 to $51.5 billion (Chart 1) and raised the EPS guidance from $9.80 to $10.40 per diluted share, which are positive…

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