Universal Health Services Inc (UHS)

Conclusion

Universal Health Services owns and operates acute care hospitals and outpatient and behavioral health facilities in the United States. At a price of 197.16 USD on 9 November 2026, the company has a market capitalisation of 10.19 billion USD and an enterprise value of 16.20 billion USD.

The verdict is undervalued. The price-to-earnings ratio of 6.97 sits 52.6% below its ten-year median of 14.70, and EV to EBITDA of 5.84 is 35.8% below its median of 9.10. The DCF gives 321.11 USD per share, and the fair value band runs from 277.31 to 415.97 USD with a midpoint of 346.64 USD, a margin of safety of 75.8%. The reverse DCF implies growth of -1.1% a year, against a five-year revenue CAGR of 8.5% and a five-year free cash flow per share CAGR of -7.1%.

What holds the case up is a return on invested capital of 11.9% against a WACC of 7.9%, interest coverage of 12.1, and a five-year share count change of -5.5% a year. What would break it is net debt to EBITDA of 2.16, a five-year free cash flow conversion of 55.6%, and a next-year EPS growth estimate of only 2.4%, with three downward revisions against two upward in the last 30 days.

Financial health

Financial strength is green, held up by interest coverage of 12.1 and a current ratio of 1.37, and pulled down only by net debt to EBITDA of 2.16, which is neutral. The quick ratio is 1.11 and debt to equity is 0.81. The Altman Z-score is not available because some of its inputs are missing. The model was designed for manufacturers, and this company is a hospital operator. Insolvency risk: low, about 0.4% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is yellow: the Piotroski score of 7 out of 9 and the buybacks are positive, but free cash flow conversion over five years of 55.6% is weak. Trailing conversion is much better at 76.3%. The accrual ratio is -0.0247, and stock-based compensation is 0.5% of revenue, leaving free cash flow after stock compensation of 1.02 billion USD on a trailing basis. The share count fell at a five-year CAGR of -5.5%. The Beneish M-score is not available. The company beat earnings expectations in six of the last eight quarters, with an average surprise of 7.3%. Estimate revisions are negative: the current-year estimate changed by -0.4% over 90 days, and the next-year estimate by -4.8%.

Profitability

Profitability is green. The operating margin of 10.9% equals its ten-year median, and the net margin of 8.0% sits above its median of 7.2%. The gross margin of 69.8% is well below its median of 89.2%, which may reflect a change in how the figure is reported. The main support is return on invested capital of 11.9% against a WACC of 7.9%, a gap of 4.0 points. Return on equity of 19.2% is flattered by leverage: the DuPont split shows a net margin of 8.6%, asset turnover of 1.09 and an equity multiplier of 2.19.

Growth

Growth is green. Revenue compounded at 9.0% over three years, 8.5% over five and 6.7% over ten, and it grew in all ten of the last ten years. EPS compounded at 36.2% over three years, 15.9% over five and 13.1% over ten. Free cash flow per share fell at 7.1% a year over five years, although it rose over three years. The estimate for next year's EPS growth is only 2.4%, which is neutral and well below the historical record.

Valuation

Valuation is green, with the verdict assessed as good. Every multiple is below its ten-year median: price-to-earnings 6.97 against 14.70, price-to-free-cash-flow 9.14 against 20.67, and price-to-book 1.34 against 1.97. The DCF of 321.11 USD uses a discount rate of 10.4%. The fair value from historical multiples is 372.17 USD. The fair value band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The dividend yield is 0.5% and the payout on free cash flow is 4.4%.

Risks

Net debt to EBITDA of 2.16 means that a fall in earnings would raise leverage quickly, which matters for a company that already has a weak five-year free cash flow conversion of 55.6%. A further fall in estimates, with the next-year EPS growth at 2.4%, would narrow the gap between the current price and the DCF. The gross margin is far below its median, and the reason is not explained in the data. Two values are not available: the Altman Z-score and the Beneish M-score. This analysis has no debt maturity schedule and no revenue split by segment, so it cannot judge refinancing risk or which hospital operations drive the results.