Friday, 21 August 2015

Valuation – HCA is Underpriced

HCA Holdings. (NASDAQ: HCA)
Healthcare; Hospitals; 10%-15% Upside

Assumptions:

  • EPS is expected to grow at CAGR of 11% during 2015-2019. 0% growth is assumed in perpetuity.
  • Retained earnings are projected to turn positive during 2018
  • CAPM is used to calculate the cost of equity. NASDAQ composite is assumed to reflect the return on market.


Observation: The stock lost around 6% of its value  during the last month. However, the EVA based valuation  indicates that the market may be over reacting. The stock has the ability to touch $100, translating into a 15% upside.

Detailed thesis and Monte Carlo simulation is available on Prudena.