Community Health Systems Overvalued
Those who have been following Community Health Systems since the firm's stock tumbled in October 2016 following the $7.6B merger with HMA may be wondering if the hospital giant has found its footing after three consecutive quarters of being EPS positive, rallying stock prices to a 52-week high record of $11.04/share. Today, I am here to tell you that this stock is very much overpriced compared to the firm's current market value.
Highlights (Quarter by Quarter Fundamental Analysis)
Short-term assets such as Cash and Cash equivalence have increased again by 17% to 1.8B, while receivables and inventory have decreased, signaling that Community Health Systems could be improving their asset turnover or we will see a decrease in net income next quarter. Total assets have slightly increased while debts have slightly decreased resulting in a 2% decrease in debt-to-assets, however, the firm has continued the trend of financing assets with more debt with a 5% increase in debt-to-equity from 28.1% to 29.5%. CYH also maintains an enterprise value far greater than their market cap value. CYH has continued the trend of cutting SGA expenses. Although we see a reduction in FCF, it remains positive.
Using the DCF model, we have a fair-market-value of about $6.30/share.
(One-year Chart using Technical Analysis)
Upon reviewing the charts, we will most likely see a decline in the stock's price. The RSI and MACD are bearish while the price is testing the 20 EMA. Analyzing the volume, we are seeing that the bulls are starting to lose momentum.
Short/put - $5.70 (low confidence) to $6.30 (high confidence)
Highlights (Quarter by Quarter Fundamental Analysis)
Short-term assets such as Cash and Cash equivalence have increased again by 17% to 1.8B, while receivables and inventory have decreased, signaling that Community Health Systems could be improving their asset turnover or we will see a decrease in net income next quarter. Total assets have slightly increased while debts have slightly decreased resulting in a 2% decrease in debt-to-assets, however, the firm has continued the trend of financing assets with more debt with a 5% increase in debt-to-equity from 28.1% to 29.5%. CYH also maintains an enterprise value far greater than their market cap value. CYH has continued the trend of cutting SGA expenses. Although we see a reduction in FCF, it remains positive.
Using the DCF model, we have a fair-market-value of about $6.30/share.
(One-year Chart using Technical Analysis)
Upon reviewing the charts, we will most likely see a decline in the stock's price. The RSI and MACD are bearish while the price is testing the 20 EMA. Analyzing the volume, we are seeing that the bulls are starting to lose momentum.
Short/put - $5.70 (low confidence) to $6.30 (high confidence)