DCF Studio

    HCA · NYQ · Healthcare

    HCA Healthcare, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 529.15

    Market price

    USD 427.71

    Implied upside

    +23.7%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 7.0% of revenue against depreciation of 4.8%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 529.15+23.7%
    Exit multiple
    USD 531.54+24.3%
    Market price
    USD 427.71

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn5bn11bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 81.5bnUSD 88.0bnUSD 94.9bnUSD 102.4bnUSD 110.4bn+7.9%
    EBITUSD 12.4bnUSD 13.3bnUSD 14.4bnUSD 15.5bnUSD 16.7bn+7.9%
    NOPATUSD 9.8bnUSD 10.5bnUSD 11.4bnUSD 12.3bnUSD 13.2bn+7.9%
    Add depreciation & amortisationUSD 3.9bnUSD 4.2bnUSD 4.5bnUSD 4.9bnUSD 5.2bn+7.9%
    Less capital expenditureUSD -5.7bnUSD -6.2bnUSD -6.7bnUSD -7.2bnUSD -7.7bn+7.9%
    Less increase in working capitalUSD -111.9mUSD -120.7mUSD -130.2mUSD -140.5mUSD -151.5m+7.9%
    Free cashflow to firmUSD 7.8bnUSD 8.4bnUSD 9.1bnUSD 9.8bnUSD 10.6bn+7.9%
    Discount factor0.96000.88480.81540.75150.6926-
    Present valueUSD 7.5bnUSD 7.5bnUSD 7.4bnUSD 7.4bnUSD 7.3bn-0.6%
    Present Value Of The ForecastUSD 37.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.073Reported 1.109, pulled toward 1.0 (Blume)
    Cost of equity10.90%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 92.6bn65.5% of capital
    Total debtUSD 48.7bn34.5% of capital, book value as a proxy
    Tax rate20.9%Effective, capped at statutory
    WACC8.51%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 529.15

    79% of EV

    Forecast FCFF, final year
    USD 10.6bn
    Capex at depreciation, working capital in reinvestment
    USD 13.2bn
    Less reinvestment at g/ROIC (12.2% of NOPAT)
    USD -1.6bn
    Capitalised
    USD 11.6bn
    ROIC (reported)
    20.4%
    Terminal value, undiscounted
    USD 198.2bn
    Terminal value, discounted
    USD 137.3bn
    Enterprise value
    USD 174.4bn
    Less net debt
    USD 47.7bn
    Equity value
    USD 126.7bn

    Exit at 9.1x EBITDA

    Value per shareUSD 531.54

    79% of EV

    Terminal value, undiscounted
    USD 199.0bn
    Terminal value, discounted
    USD 137.9bn
    Enterprise value
    USD 175.0bn
    Less net debt
    USD 47.7bn
    Equity value
    USD 127.3bn

    Spread between methods: 0%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.51%745.12813.10897.791006.361150.70
    7.51%584.34626.34676.55737.67813.82
    8.51%469.68497.20529.15566.73611.64
    9.51%383.84402.63423.97448.46476.87
    10.51%317.22330.43345.19361.80380.65

    Outlined: this model. Green text: above today's price of 427.71. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year7.9%4.3%-3.5pp
    EBIT margin15.2%13.1%-2.0pp
    Discount rate8.5%9.5%+1.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.