When investors look for opportunities that others might have overlooked, value investing remains one of the most time-tested approaches. The strategy, rooted in the work of Benjamin Graham and popularized by Warren Buffett, centers on finding companies whose market price sits below their calculated intrinsic value. A key part of this process involves screening for stocks that trade at a discount while still maintaining solid fundamentals—healthy profitability, reasonable growth, and a sound financial structure. The 'Decent Value' screen does exactly that: it identifies stocks carrying a strong valuation rating (above 7 out of 10), while ensuring they also meet minimum thresholds for profitability, health, and growth. One stock that currently fits this profile is Universal Health Services-B (NYSE:UHS), a major player in the healthcare services sector.
Valuation Metrics
The most striking aspect of UHS from a value perspective is its valuation rating of 9 out of 10, which signals the stock is trading at a large discount relative to its peers and the broader market. For value investors, a cheap valuation is the primary draw—it implies the market has not fully priced in the company’s worth.
- Price/Earnings ratio: At 6.94, this is very low compared to the industry average (89.30) and the S&P 500 average (26.68). UHS is cheaper than 97% of its industry peers on this metric.
- Price/Forward Earnings: At 6.10, the forward multiple reinforces the cheapness idea, again beating 97% of comparable companies.
- Enterprise Value/EBITDA: This ratio places UHS cheaper than 95% of its industry peers, suggesting the entire enterprise—debt included—is undervalued.
- Price/Free Cash Flow: UHS is cheaper than 87% of its industry on this cash-based valuation measure.
These numbers are exactly what value investors look for: a stock that appears to be significantly mispriced relative to its earnings and cash generation potential.
Profitability
A low valuation alone is not enough—if a company cannot generate profits, the discount may simply reflect poor business quality. UHS earns a profitability rating of 7, and the underlying data supports a strong, profit-generating operation.
- Return On Assets: At 9.70%, UHS outperforms 92% of its industry peers.
- Return On Equity: 20.37% places it among the top 12% of the industry.
- Return On Invested Capital: Currently 12.67%, which is above the 3-year average of 10.23%, indicating improving efficiency.
- Profit Margin: 8.56% is among the best in its sector, outperforming 89% of peers.
- Operating Margin: 11.50% beats 82% of the industry.
For a value investor, solid profitability confirms that the low valuation isn’t driven by weak earnings power. Instead, the market may be overlooking a company that continues to generate above-average returns on its capital.
Financial Health
Even the most undervalued stock can become a value trap if the balance sheet is fragile. UHS scores a 5 on financial health—middling but not alarming—and several checks indicate it is in decent shape.
- Debt to Equity: 0.53, a reasonable level that suggests moderate reliance on debt financing.
- Debt to Free Cash Flow: 5.16 years to pay off all debt, which is better than 60% of peers.
- Shares outstanding: Reduced over both the past 1-year and 5-year periods, which benefits shareholders by increasing earnings per share.
- Debt to Assets: Improved compared to one year ago.
There are minor concerns: the current ratio (1.08) and quick ratio (1.01) are lower than many industry peers, and the Altman Z-score sits at 2.94—solidly in the grey zone but not signaling immediate distress. However, the broader picture is that UHS remains solvent and is generating enough cash to service its debt without issue.
Growth
A value stock that has stalled may never realize its potential. UHS earns a 5 on growth, supported by a strong recent track record even if future projections are more modest.
- EPS growth (past year): 26.77%, an impressive jump.
- EPS growth (average annual, multi-year): 14.35%, clearly above the industry norm.
- Revenue growth (past year): 10.42%, quite solid.
- Revenue growth (average annual): 8.48%, showing consistent expansion.
- Forward EPS growth (estimated): 7.62% annually, and forward revenue growth at 6.10%—still positive, though a slowdown from the past.
Value investors want to see growth that validates the intrinsic value calculation. While future estimates are more subdued, the past performance shows that UHS has been growing at a healthy clip, and the expected expansion, while slower, still supports the notion that the company is not in decline.
A Well-Rounded Value Candidate
When you combine a valuation rating of 9, profitability of 7, health of 5, and growth of 5, UHS presents a balanced picture for value-focused investors. The stock is remarkably cheap by multiple measures, yet it continues to generate strong profits and returns. The financial health, while not flawless, does not raise red flags, and the growth story—while decelerating—is still positive. For those using a value investing approach, this kind of profile often signals an opportunity where the market has not yet caught up with the company’s fundamental strength.
You can review the full Fundamental Analysis Report for UHS to go deeper into the numbers.
Finding More Decent Value Stocks
If you are interested in screening for other stocks that combine a strong valuation with decent profitability, health, and growth, the 'Decent Value' screen can help you find similar opportunities. To explore a broader list of candidates that meet these criteria, visit the ChartMill Stock Screener - Decent Value Screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own research or consult a qualified financial advisor before making investment decisions.
Read full article here »
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Universal Health Services-B (NYSE:UHS) Offers a Strong Value Investing Opportunity with a 9/10 Valuation Rating
When investors look for opportunities that others might have overlooked, value investing remains one of the most time-tested approaches. The strategy, rooted in the work of Benjamin Graham and popularized by Warren Buffett, centers on finding companies whose market price sits below their calculated intrinsic value. A key part of this process involves screening for stocks that trade at a discount while still maintaining solid fundamentals—healthy profitability, reasonable growth, and a sound financial structure. The 'Decent Value' screen does exactly that: it identifies stocks carrying a strong valuation rating (above 7 out of 10), while ensuring they also meet minimum thresholds for profitability, health, and growth. One stock that currently fits this profile is Universal Health Services-B (NYSE:UHS), a major player in the healthcare services sector.
Valuation Metrics
The most striking aspect of UHS from a value perspective is its valuation rating of 9 out of 10, which signals the stock is trading at a large discount relative to its peers and the broader market. For value investors, a cheap valuation is the primary draw—it implies the market has not fully priced in the company’s worth.
These numbers are exactly what value investors look for: a stock that appears to be significantly mispriced relative to its earnings and cash generation potential.
Profitability
A low valuation alone is not enough—if a company cannot generate profits, the discount may simply reflect poor business quality. UHS earns a profitability rating of 7, and the underlying data supports a strong, profit-generating operation.
For a value investor, solid profitability confirms that the low valuation isn’t driven by weak earnings power. Instead, the market may be overlooking a company that continues to generate above-average returns on its capital.
Financial Health
Even the most undervalued stock can become a value trap if the balance sheet is fragile. UHS scores a 5 on financial health—middling but not alarming—and several checks indicate it is in decent shape.
There are minor concerns: the current ratio (1.08) and quick ratio (1.01) are lower than many industry peers, and the Altman Z-score sits at 2.94—solidly in the grey zone but not signaling immediate distress. However, the broader picture is that UHS remains solvent and is generating enough cash to service its debt without issue.
Growth
A value stock that has stalled may never realize its potential. UHS earns a 5 on growth, supported by a strong recent track record even if future projections are more modest.
Value investors want to see growth that validates the intrinsic value calculation. While future estimates are more subdued, the past performance shows that UHS has been growing at a healthy clip, and the expected expansion, while slower, still supports the notion that the company is not in decline.
A Well-Rounded Value Candidate
When you combine a valuation rating of 9, profitability of 7, health of 5, and growth of 5, UHS presents a balanced picture for value-focused investors. The stock is remarkably cheap by multiple measures, yet it continues to generate strong profits and returns. The financial health, while not flawless, does not raise red flags, and the growth story—while decelerating—is still positive. For those using a value investing approach, this kind of profile often signals an opportunity where the market has not yet caught up with the company’s fundamental strength.
You can review the full Fundamental Analysis Report for UHS to go deeper into the numbers.
Finding More Decent Value Stocks
If you are interested in screening for other stocks that combine a strong valuation with decent profitability, health, and growth, the 'Decent Value' screen can help you find similar opportunities. To explore a broader list of candidates that meet these criteria, visit the ChartMill Stock Screener - Decent Value Screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice. Always conduct your own research or consult a qualified financial advisor before making investment decisions.
Read full article here »