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Tenet Healthcare Corp - Stock Quote THC

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Morningstar's Tenet Healthcare Corp Stock Analysis

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Raising Tenet FVE on Lower Capital Cost Assumptions After Great Q1 That Included Deleveraging

Julie Utterback, CFA Senior Equity Analyst

Analyst Note

| Julie Utterback, CFA |

Tenet turned in stellar first-quarter results, and we are raising our fair value estimate to $95 per share from $66 previously to account for the company's recent strong performance and declining debt leverage. The major driver of our fair value estimate change is our lowered cost of capital assumption ($20 of our fair value change) due to ongoing reductions in net debt leverage, which now sits around 4 times adjusted EBITDA on active debt repayment and increasing profits. Considering our assessment of Tenet's credit risk and recent spreads on its bonds, we have lowered our cost of debt assumption much closer to market rates than we previously assumed. Also, investors should note that Tenet's ROICs currently stand well over WACC, and there could be further upside to our fair value estimate (about $10 per share) if the moat rating were raised to narrow from none, all else being equal.

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Tenet Healthcare Corp's Company Profile

Business Description

Tenet Healthcare is a Dallas-based healthcare services organization. It operates a collection of hospitals (60 as of March 2022) and about 550 ambulatory surgery centers and other outpatient facilities across the U.S., primarily in the south. Through its Conifer segment, Tenet also provides revenue cycle management solutions. By adjusted EBITDA excluding grant income, hospitals accounted for about 55%, ambulatory services accounted for 35% and Conifer accounted for about 10% of Tenet in 2021.

14201 Dallas Parkway, Suite 1400
Dallas, TX, 75254
T +1 469 893-2200
Sector Healthcare
Industry Medical Care Facilities
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 31, 2022
Stock Type Slow Growth
Employees 101,100

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