Stock Analysis on Net
Stock Analysis on Net

HCA Healthcare Inc. (NYSE:HCA)

This company has been moved to the archive! The financial data has not been updated since May 3, 2022.

Present Value of Free Cash Flow to Equity (FCFE)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

HCA Healthcare Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFEt or Terminal value (TVt) Calculation Present value at 19.80%
01 FCFE0 8,599
1 FCFE1 67,635 = 8,599 × (1 + 686.54%) 56,455
2 FCFE2 416,839 = 67,635 × (1 + 516.31%) 290,428
3 FCFE3 1,859,390 = 416,839 × (1 + 346.07%) 1,081,375
4 FCFE4 5,128,801 = 1,859,390 × (1 + 175.83%) 2,489,756
5 FCFE5 5,415,769 = 5,128,801 × (1 + 5.60%) 2,194,504
5 Terminal value (TV5) 40,253,467 = 5,415,769 × (1 + 5.60%) ÷ (19.80% – 5.60%) 16,310,960
Intrinsic value of HCA Healthcare Inc. common stock 22,423,478
 
Intrinsic value of HCA Healthcare Inc. common stock (per share) $75,887.18
Current share price $216.30

Based on: 10-K (reporting date: 2021-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.67%
Expected rate of return on market portfolio2 E(RM) 13.79%
Systematic risk of HCA Healthcare Inc. common stock βHCA 1.66
 
Required rate of return on HCA Healthcare Inc. common stock3 rHCA 19.80%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rHCA = RF + βHCA [E(RM) – RF]
= 4.67% + 1.66 [13.79% – 4.67%]
= 19.80%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

HCA Healthcare Inc., PRAT model

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Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Cash dividends declared 628 150 555 496 —
Net income attributable to HCA Healthcare, Inc. 6,956 3,754 3,505 3,787 2,216
Revenues 58,752 51,533 51,336 46,677 43,614
Total assets 50,742 47,490 45,058 39,207 36,593
Stockholders’ equity (deficit) attributable to HCA Healthcare, Inc. (933) 572 (2,808) (4,950) (6,806)
Financial Ratios
Retention rate1 0.91 0.96 0.84 0.87 1.00
Profit margin2 11.84% 7.28% 6.83% 8.11% 5.08%
Asset turnover3 1.16 1.09 1.14 1.19 1.19
Financial leverage4 — 83.02 — — —
Averages
Retention rate 0.92
Profit margin 7.83%
Asset turnover 1.15
Financial leverage 83.02
 
FCFE growth rate (g)5 686.54%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

1 Retention rate = (Net income attributable to HCA Healthcare, Inc. – Cash dividends declared) ÷ Net income attributable to HCA Healthcare, Inc.
= (6,956 – 628) ÷ 6,956
= 0.91

2 Profit margin = 100 × Net income attributable to HCA Healthcare, Inc. ÷ Revenues
= 100 × 6,956 ÷ 58,752
= 11.84%

3 Asset turnover = Revenues ÷ Total assets
= 58,752 ÷ 50,742
= 1.16

4 Financial leverage = Total assets ÷ Stockholders’ equity (deficit) attributable to HCA Healthcare, Inc.
= 50,742 ÷ -933
= —

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.92 × 7.83% × 1.15 × 83.02
= 686.54%

FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (63,913 × 19.80% – 8,599) ÷ (63,913 + 8,599)
= 5.60%

where:
Equity market value0 = current market value of HCA Healthcare Inc. common stock (US$ in millions)
FCFE0 = the last year HCA Healthcare Inc. free cash flow to equity (US$ in millions)
r = required rate of return on HCA Healthcare Inc. common stock

FCFE growth rate (g) forecast

HCA Healthcare Inc., H-model

Microsoft Excel
Year Value gt
1 g1 686.54%
2 g2 516.31%
3 g3 346.07%
4 g4 175.83%
5 and thereafter g5 5.60%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 686.54% + (5.60% – 686.54%) × (2 – 1) ÷ (5 – 1)
= 516.31%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 686.54% + (5.60% – 686.54%) × (3 – 1) ÷ (5 – 1)
= 346.07%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 686.54% + (5.60% – 686.54%) × (4 – 1) ÷ (5 – 1)
= 175.83%