Executive Summary:
Universal Health Services (UHS) is a Fortune 500 for-profit hospital system which is comprised of acute care facilities, behavioral health facilities and ambulatory centers. Headquartered in King of Prussia, UHS manages 31 acute care facilities, 113 behavioral health facilities, and 12 ambulatory centers throughout 32 states in the country. Services include: surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, pharmacy services and behavioral health services to name a few.
In evaluating the investment opportunity in this corporation, it was decided that investors should not buy at this time. In applying the Earnings Multiplier Approach, the stock seems to be fairly valued at $50.78. (The calculation led to an intrinsic value of $50.45).
The US economy has a bleak outlook as we head into 2008. Growth is anticipated to be lower than prior years. The GDP is forecasted to be 2.7%, while it has been above 3% for the last three years. Many analysts believe the US has a 50/50 chance of heading for a recession. The sub prime mortgage crisis has had the biggest effect on the economy over the last few months. The rising price of oil, which has approached $100 a barrel, has caused energy and transportation expenses to rise for both corporations and the consumers. The Fed’s decisions on cutting the interest rate, the weakening value of the dollar and the 2008 elections have also made for a volatile market.
The Healthcare industry has also had its share of struggles recently. The ever growing problem of uninsured patients and uncompensated care has weighed heavily on many bottom lines. Decreased net revenues have also been met by ris ...