We recently compiled a list of the 12 Cheap Healthcare Stocks to Buy Heading into 2025. In this article, we are going to take a look at where HCA Healthcare, Inc. (NYSE:HCA) stands against the other cheap healthcare stocks.
The Resilience and Challenges of Global Healthcare Spending
Investing in healthcare equities is typically seen as protective during recessionary times. This is because, even in hard financial times, consumers usually do not reduce their usage of prescription drugs or other necessary healthcare services. National healthcare spending is expected to reach an estimated $4.8 trillion in 2023 and increase at a 5.6% annual pace between 2027 and 2032, according to the Centers for Medicare and Medicaid Services (CMS).
According to a World Health Organization report published in December 2023, worldwide healthcare spending reached a record high in 2021 at $9.8 trillion, or 10.3% of global GDP. Except in low-income countries, where government health spending declined as a result of their significant reliance on foreign aid, public health spending increased globally. While 11% of the world’s population lived in countries where yearly healthcare spending was less than $50 per person, high-income countries paid about $4,000 per capita in 2021. Additionally, low-income countries accounted for just 0.24% of global health spending, despite having 8% of the world’s population. The study claims that although public health spending rose dramatically during the peak of the COVID-19 epidemic, this increase is unlikely to last in the long term as countries now place a higher priority on economic problems such as high inflation, decreasing GDP, and mounting debt servicing. According to Dr. Bruce Aylward, WHO Assistant Director-General for Universal Health Coverage, Life Course:
“Sustained public financing on health is urgently needed to progress towards universal health coverage. It is especially critical at this time when the world is confronted by the climate crisis, conflicts, and other complex emergencies. People’s health and well-being need to be protected by resilient health systems that can also withstand these shocks.”
The impending collapse of the U.S. healthcare system, especially in terms of staff shortages and financial instability, is the most worrisome aspect of the healthcare sector. There is a serious manpower shortage in the healthcare sector. An additional 124,000 doctors are expected to be required by 2030, and by 2027, 800,000 registered nurses (RNs) are expected to retire. A startling 24% of staff registered nurses are currently leaving their jobs. In certain healthcare systems, this deficit has resulted in the shutdown of critical patient services like obstetrics, pediatrics, psychiatry, and intensive care units.
Nevertheless, the U.S. spends over twice as much on healthcare as the OECD average, despite these difficulties, and the average results are poorer. This discrepancy emphasizes how ineffective and unsustainable the current system is. Further taxing the revenue cycle and reducing the amount of money available for therapeutic treatments is the fact that 58% of hospital bad debt originates from insured patients. The future of the American healthcare system appears bleak when these elements are taken together. The industry faces a systemic collapse that could have serious repercussions for the economy and public health if substantial intervention and reform are not implemented.
Our Methodology
Our methodology involved selecting stocks with a market capitalization exceeding $10 billion and a price-to-earnings (P/E) ratio below 17. We then ranked these stocks based on their P/E ratios, as of December 22.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of healthcare professionals in lab coats and masks meeting at a hospital ward.
HCA Healthcare, Inc. (NYSE:HCA)
P/E Ratio: 13.88
HCA Healthcare, Inc. (NYSE:HCA) is a leading healthcare services provider operating a vast network of facilities and it stands eighth among the 12 cheap healthcare stocks to buy heading into 2025. It offers hospital care, surgical procedures, emergency services, diagnostics, mental health care, and specialized treatments like cardiology, oncology, neurosurgery, and orthopedics.
HCA Healthcare, Inc. (NYSE:HCA) delivered a strong financial performance in Q3 2024 despite hurricane impacts. Revenue rose 8% year-over-year to $17.487 billion, driven by a 4.5% increase in same-facility admissions. Net income was $1.27 billion, or $4.88 per diluted share, with adjusted EPS up 25% to $4.90 after accounting for hurricane impacts. Adjusted EBITDA reached $3.267 billion, with a 90-basis-point margin improvement. Operating cash flow totaled $3.515 billion. Despite disruptions from Hurricanes Helene and Milton, the company expects 3%-4% volume growth in 2025. Capital expenditures for 2024 are projected at $5 billion, supporting network expansion.
As of Q3 2024, 66 hedge funds owned shares in the company, according to the Insider Monkey database. The largest shareholder was First Eagle Investment Management, with stakes valued at $1.8 billion. Analysts have a consensus rating of Moderate Buy for the stock.
Overall HCA ranks 8th on our list of the cheap healthcare stocks to buy heading into 2025. While we acknowledge the potential of HCA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HCA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.