Universal Health Services, Inc. Hit a 52 Week High, Can the Run Continue?

Have you been paying attention to shares of Universal Health Services UHS? Shares have been on the move with the stock up 7% over the past month. The stock hit a new 52-week high of $207.7 in the previous session. Universal Health Services has gained 34.5% since the start of the year compared to the 6.6% move for the Zacks Medical sector and the 31.5% return for the Zacks Medical - Hospital industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 24, 2024, Universal Health Services reported EPS of $4.31 versus consensus estimate of $3.37.

For the current fiscal year, Universal Health Services is expected to post earnings of $13.83 per share on $15.57 billion in revenues. This represents a 31.21% change in EPS on a 9.01% change in revenues. For the next fiscal year, the company is expected to earn $15.07 per share on $16.28 billion in revenues. This represents a year-over-year change of 8.95% and 4.58%, respectively.

Valuation Metrics

Universal Health Services may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Universal Health Services has a Value Score of A. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 14.8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 16.3X. On a trailing cash flow basis, the stock currently trades at 10.5X versus its peer group's average of 10.9X. Additionally, the stock has a PEG ratio of 0.97. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Universal Health Services currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Universal Health Services fits the bill. Thus, it seems as though Universal Health Services shares could still be poised for more gains ahead.

How Does UHS Stack Up to the Competition?

Shares of UHS have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Tenet Healthcare Corporation THC. THC has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of A.

Earnings were strong last quarter. Tenet Healthcare Corporation beat our consensus estimate by 22.22%, and for the current fiscal year, THC is expected to post earnings of $9.14 per share on revenue of $20.25 billion.

Shares of Tenet Healthcare Corporation have gained 8.3% over the past month, and currently trade at a forward P/E of 16.37X and a P/CF of 9.24X.

The Medical - Hospital industry is in the top 2% of all the industries we have in our universe, so it looks like there are some nice tailwinds for UHS and THC, even beyond their own solid fundamental situation.

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