Universal Health at 9.6X Earnings: A Rare Discount in Hospital Stocks?
Universal Health Services, Inc. UHS currently stands out as a compelling value play within the medical facilities space. The stock trades at a forward earnings multiple of 9.62X, below its five-year median of 11.70X and the industry average of 10.84X. Relative to peers, the valuation gap is even clearer. Tenet Healthcare Corporation THC and HCA Healthcare, Inc. HCA trade at forward 12-month P/E ratios of 11.71X and 15.95X, respectively, positioning UHS as the more attractively priced option for investors seeking value in the hospital space.This discounted valuation is further supported by a Value Score of A, reinforcing the stock’s appeal to valuation-conscious investors. Image Source: Zacks Investment ResearchShare Price GainsUHS has also delivered solid share price performance. Over the past year, the stock has advanced 26.7%, outperforming the industry’s growth of 22.1% and the S&P 500’s 16.3% rise. While its returns trail those of Tenet and HCA during the same period, UHS has still generated meaningful gains, reflecting improving fundamentals and investor confidence.Price Performance – UHS, THC, HCA, Industry & S&P 500 Image Source: Zacks Investment ResearchGiven this combination of discounted valuation and respectable price appreciation, a closer look at UHS’ growth drivers is warranted to assess whether the stock offers an attractive opportunity at current levels.Volume Growth ContinuesOperational momentum remains a key tailwind. UHS continues to post steady revenue growth across both its Acute Care Hospital Services and Behavioral Health Care Services segments, supported by rising volumes. Adjusted admissions in the Acute Care segment increased 6.5% in 2023, followed by growth of 3.8% in 2024 and 4.6% during the first nine months of 2025. Meanwhile, adjusted patient days in the Behavioral Health segment rose 1.7% in 2023 and 1.6% in 2024, remaining rather stable through the first three quarters of 2025. These trends highlight sustained demand across UHS’ core service offerings.To capitalize on this demand, the company pursues a disciplined acquisition strategy. Profitability has also strengthened, supported by higher occupancy rates, improved pricing from favorable managed care contracts and easing labor cost pressures. Adjusted net margins expanded from 5.2% in 2023 to 7.1% in 2024 and further to 8.1% in the third quarter of 2025, underscoring operational leverage.Robust Financial PositionStrong cash generation provides additional flexibility. UHS generated $525 million in free cash flow in 2023, followed by $1.1 billion in 2024 and $537 million during the first nine months of 2025. Its balance sheet remains conservative, with a long-term debt-to-capital ratio of 35.7%, well below the industry’s average of 74.9%. This financial strength enhances resilience while supporting growth initiatives.Robust cash flows have also enabled significant shareholder returns. Since 2019, UHS has repurchased around 36% of its outstanding shares. Buybacks totaled $525 million in 2023, $598.5 million in 2024 and $565.8 million through the first nine months of 2025. In October 2025, the company expanded its repurchase authorization by $1.5 billion, leaving approximately $1.8 billion available.UHS’ Earnings Estimates & Surprise HistoryEarnings visibility remains favorable. The Zacks Consensus Estimate for 2025 adjusted earnings stands at $21.83 per share, indicating year-over-year growth of 31.4%, followed by a projected 7.4% increase in 2026. Both witnessed one upward estimate revision over the past month, against no downward movement. Revenue estimates imply growth of 9.7% in 2025 and 5.2% in 2026.UHS has exceeded earnings expectations in each of the past four quarters, delivering an average surprise of 15.2%.Universal Health Services, Inc. Price, Consensus and EPS Surprise Universal Health Services, Inc. price-consensus-eps-surprise-chart | Universal Health Services, Inc. QuoteAnalysts See Clear Upside AheadFinally, analyst sentiment points to additional upside. UHS shares trade below the average price target of $252.18, suggesting potential upside of roughly 12.1%. While target estimates range widely from $190 to $302, reflecting varying risk assumptions, the overall outlook remains constructive.ConclusionUniversal Health appears well positioned for investors seeking value with improving fundamentals. The stock’s discounted valuation, consistent volume growth across segments, expanding margins and strong free cash flow generation provide a solid base. A conservative balance sheet and aggressive share repurchase program further enhance shareholder returns. With earnings estimates moving higher, a strong track record of positive surprises and analysts pointing to double-digit upside, UHS looks favorable at current levels. It has a Zacks Rank #2 (Buy) at present, making it an attractive option for investors focused on durable growth and valuation support. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Naming Top 10 Stocks for 2026Want to be tipped off early to our 10 top picks for the entirety of 2026? History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2025, the Zacks Top 10 Stocks gained +2,530.8%, more than QUADRUPLING the S&P 500’s +570.3%.Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2026. Don’t miss your chance to get in on these stocks when they’re released on January 5. Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Universal Health Services, Inc. (UHS): Free Stock Analysis Report Tenet Healthcare Corporation (THC): Free Stock Analysis Report HCA Healthcare, Inc. (HCA): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks
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