HCA Healthcare Trades at a Premium: Buy, Hold, or Avoid the Stock?

U.S. hospital operator HCA Healthcare, Inc. HCA is currently trading at a noticeable premium compared with its historical and industry benchmarks. The stock’s forward 12-month price-to-earnings (P/E) ratio stands at 14.67X, ahead of its five-year median of 13.91X and well above the broader industry average of 13.31X. By comparison, Universal Health Services, Inc. UHS trades at 8.87X and Tenet Healthcare Corporation THC at 11.73X.

This valuation gap underscores the need to examine whether HCA’s fundamentals and growth prospects justify paying a higher price.

HCA’s Financial Position

At the close of the second quarter, HCA held $939 million in cash and equivalents, a sharp 51.4% decline from year-end 2024. Meanwhile, its long-term debt (excluding issuance costs and discounts) rose to $39.4 billion. A high debt level induces a rise in interest expenses, which escalated 9.5% year over year in the first half of 2025.

Nevertheless, HCA’s strong cash-generating abilities are expected to improve its financial position. Over the trailing 12 months, free cash flow totaled $7.3 billion, reflecting 29.3% growth from the prior year and building on a 20.3% rise in 2024. Such consistent growth provides the company with ample flexibility to fund acquisitions, reduce leverage and deliver shareholder returns.

Capital deployment has been aggressive. HCA repurchased $3.8 billion in shares in 2023 and $6 billion in 2024, followed by another $5 billion in the first half of 2025. Dividend payouts reached $351 million during the same period. As of June 30, 2025, the company still had $5.8 billion remaining under its existing repurchase authorization.

HCA’s Price Performance

HCA Healthcare shares have surged 34.3% so far this year, outperforming the industry average of 27.3% and the S&P 500 Index’s gain of 13.5%. While Universal Health Services has managed only a 5.7% increase, Tenet Healthcare has surged ahead with a 48% rise, reflecting robust momentum due to rising demand.

HCA YTD Performance vs. UHS, THC & S&P 500

HCA’s Growth Drivers

HCA Healthcare continues to benefit from rising admissions and the breadth of its healthcare offerings across the United States. In the first half of 2025, same-facility equivalent admissions rose 2.2% year over year, while revenue per equivalent admission climbed 3.5%. The company’s surgery centers have seen a pickup in activity, with occupancy improving from 72.7% in 2024 to an average of 74.5% this year so far.

To meet growing demand, HCA has committed to strengthening its infrastructure, investing in clinical systems, digital upgrades and modernized care models. These investments are designed not only to support higher patient volumes but also to improve efficiency and outcomes, reinforcing its long-term growth trajectory.

HCA’s Earnings Estimates & Surprise History

The Zacks Consensus Estimate for HCA Healthcare’s 2025 earnings is pegged at $26.11 per share, indicating 18.9% year-over-year growth. The same for 2026 signals a further 7.1% increase. The estimates have remained stable over the past week. Also, the consensus mark for HCA’s 2025 and 2026 revenues suggests 6.1% and 4.4% year-over-year growth, respectively.

The company beat earnings estimates in each of the past four quarters with an average surprise of more than 7%.

HCA Healthcare, Inc. Price, Consensus and EPS Surprise

HCA Healthcare, Inc. price-consensus-eps-surprise-chart | HCA Healthcare, Inc. Quote

HCA’s Headwinds

Despite its strengths, HCA faces notable challenges. The U.S. healthcare sector remains vulnerable to regulatory shifts and reimbursement pressure from the current administration. The growing shift toward home-based services will likely challenge hospital-centric operations in the future, potentially diluting patient volumes in traditional facilities.

Some operational metrics have shown signs of strain. Outpatient surgery cases declined 1.9% in 2024 and fell another 1.3% in the first half of 2025. For the full year, we expect a 1.5% year-over-year decline in the metric. Average length of stay has also contracted steadily, down 2.8% in 2023, 1.6% in 2024 and 1.2% so far in 2025.

Bottom Line

HCA Healthcare’s solid earnings outlook, consistent cash flow generation and shareholder-friendly capital deployment highlight its strength as a leading hospital operator. However, the stock’s elevated valuation, mounting debt burden and regulatory environment temper the bullish case. While long-term growth investments support stability, near-term risks suggest limited upside at current levels.

Considering these factors, HCA currently carries a Zacks Rank #3 (Hold), implying the stock is best suited for investors looking to maintain existing positions rather than initiate new ones. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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