This Healthcare Stock Had a Tough Year. 2024 Could Bring 40% Returns.

Theo Darringer
Dec 20, 2023
2 min read

HCA Healthcare (HCA) has encountered a challenging year, but the company’s robust position in the healthcare industry, favorable demographic trends, and potential growth avenues make its stock an appealing investment opportunity.

Underperformance and Opportunity

HCA stock has trailed the S&P 500 index, returning 5.2% this year, despite its earnings per share growing four times faster than the index. The healthcare sector has faced setbacks due to the success of new weight-loss drugs, impacting stocks like HCA. However, this underperformance now presents a buying opportunity for savvy investors.

Strong Position in the Healthcare Sector

HCA Healthcare stands as the largest publicly traded healthcare provider in the U.S., operating nearly 200 hospitals across 20 states and a vast network of clinics and facilities. Its strategic regional approach and dominant market shares in growing and aging population areas position it favorably for future growth.

Scale and Growth Prospects

The company’s scale provides negotiation power with payers and superior profit margins compared to independent health systems. HCA's focus on capital investment, expansion into new markets, and growth in existing ones reflects its commitment to sustained progress.

Financial Outlook and Growth Potential

Analysts project HCA's sales to increase by about 5% to $68 billion next year, with steady profit margins. Anticipated per-share profit growth of 7.5% to $19.56 in 2024, supported by stock buybacks, demonstrates a positive trajectory. The stock's current valuation appears attractive at 13 times expected earnings.

Analysts' Confidence and Future Prospects

Analysts like David MacDonald from Truist and Lisa Gill from J.P. Morgan remain optimistic about HCA's future. Despite challenges in labor and workforce shortages, management expects 8% to 12% annual adjusted EPS growth over the next five years.

Summary: Why HCA is a Buy

While concerns about labor and workforce persist, HCA Healthcare’s strategic advantages, market dominance, and solid financial outlook make it a compelling investment choice. The stock's current valuation and growth potential position it for a notable resurgence in the healthcare sector in the coming year.

HCA stock appears poised for a strong performance in 2024, making it a top pick for investors seeking growth opportunities within the healthcare industry.