Last update on 2024-06-06

HCA Healthcare (HCA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze HCA Healthcare's Piotroski F-Score for 2023. Discover its financial strengths and weaknesses. A comprehensive guide for investors.

Short Analysis - Piotroski Score: 7

We're running HCA Healthcare (HCA) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a system to assess a company's financial health on a scale from 0 to 9. HCA Healthcare was evaluated and scored 7 out of 9, indicating a strong financial position. The company has a positive net income and cash flow, good earnings quality, decreasing leverage, effective management of shares, increasing gross margin, and better asset efficiency. However, it did not score for return on assets and current ratio.

Insights for Value Investors Seeking Stable Income

With a high Piotroski score of 7, HCA Healthcare is financially strong and worth considering for investment. Despite some minor concerns with asset return and the current ratio, the company's positive income, cash flow, reduced debt, effective share management, and operational efficiency make it a good candidate for long-term investment.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of HCA Healthcare (HCA)

Company has a positive net income?

Net income indicates a company’s profitability after all expenses have been deducted. A positive net income is fundamental in determining overall financial health.

HCA Healthcare (HCA) reported a net income of $5,242,000,000 for 2023, which is positive. This is indicative of strong profitability and adds 1 point according to the Piotroski criteria. Historical data reveals consistent positive net income over the past 20 years, with notable peaks in 2021 ($6,956,000,000) and 2022 ($5,643,000,000). This trend underscores HCA's capability to generate significant profits, maintaining financial robustness. Overall, this criterion is met positively for HCA.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a critical indicator of a company's financial health, reflecting the amount of cash generated by regular business operations. A positive CFO indicates sound financial management.

For HCA Healthcare (HCA), the Cash Flow from Operations (CFO) in 2023 stands at $9,431,000,000, which is indeed positive. This adds 1 point to HCA Healthcare under the Piotroski criterion. Historically, HCA has shown a consistent ability to generate positive cash flows year over year. For instance, despite the many challenges faced during the 2008 financial crisis, HCA maintained a positive CFO of $1,797,000,000. Recent trends from 2020 to 2023 have also shown an upward movement from $8.52 billion in 2022 to $9.43 billion in 2023, demonstrating the company's robust operational efficiency and its ability to generate cash from its core activities, which is particularly commendable in today's economic climate.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures the change in company profitability, indicating whether the firm has effectively used its assets to generate earnings.

HCA Healthcare's ROA decreased from 0.1094 in 2022 to 0.0965 in 2023. Therefore, no point is added for this criterion. Analyzing the company's historical ROA, we see a substantial consistency over the years but the current-year decline might indicate more challenges in asset optimization. Comparison with the industry median ROA, which has been consistently higher, underscores the competitive pressure HCA faces to match industry profitability benchmarks.

Operating Cashflow are higher than Netincome?

This criterion assesses if the company generates more cash than profit, which suggests good earnings quality.

For the year 2023, HCA Healthcare's operating cash flow was $9.431 billion, while its net income was $5.242 billion. Since the operating cash flow is higher, this is a good indicator. It implies that HCA Healthcare has effective earnings quality and efficient cash flow management. Over the past 20 years, HCA's operating cash flow has generally shown an upward trend from $2.166 billion in 2003 to $9.431 billion in 2023, consistently staying above net income for most years. This stability and growth are positive signs for investors regarding the company’s financial health and operational efficiency.

Liquidity of HCA Healthcare (HCA)

Leverage is declining?

Change in Leverage is an indicator of a company's financial risk and its ability to service existing debt.

Looking at the leverage ratio, HCA Healthcare's leverage decreased from 0.7526 in 2022 to 0.6951 in 2023. This indicates a positive trend, as lower leverage suggests reduced financial risk and lesser dependence on debt to finance operations. This is favorable, so for Piotroski Analysis, it adds 1 point. Historically, the leverage of HCA has fluctuated significantly, with a peak of 1.1875 in 2006 and a decreasing trend after 2015, indicating a more stable and prudent financial management approach over recent years.

Current Ratio is growing?

The criterion assesses the liquidity of a company and its ability to cover short-term obligations with its short-term assets, indicating overall financial health.

HCA Healthcare's Current Ratio has decreased from 1.3778 in 2022 to 1.1795 in 2023, registering a decline rather than an increase. Consequently, no point is awarded for this criterion. The 2023 ratio falls below the industry's median current ratio of 1.2826, suggesting that HCA Healthcare has a comparatively lower ability to cover short-term liabilities with short-term assets. This downward movement in liquidity might indicate potential challenges in meeting immediate financial obligations, which could be concerning for investors. Over the past two decades, HCA's Current Ratio has generally stayed above 1.3, but the recent decline sets a negative trend that needs careful monitoring.

Number of shares not diluted?

Reviewing the change in outstanding shares is crucial as it indicates how a company manages its equity and potential shareholder dilution.

In comparing HCA Healthcare's outstanding shares from 2022 to 2023, there is a noticeable decrease from 290,348,000 shares to 272,404,000 shares. This decline in outstanding shares is a positive sign, reflecting effective share buyback strategies and a commitment to returning value to shareholders. The overall trend over the past 20 years corroborates this strategy, with a steady decrement from a high of 510,344,828 in 2003. The decline suggests prudent capital management and enhances per-share metrics, making it attractive to investors. Therefore, HCA scores 1 point in the Piotroski analysis for this criterion.

Operating of HCA Healthcare (HCA)

Cross Margin is growing?

Gross Margin represents the proportion of revenue that exceeds the cost of goods sold (COGS), reflecting the company's financial health.

In 2023, HCA Healthcare reported a Gross Margin of 0.8476, compared to 0.8444 in 2022. This denotes an increase in Gross Margin, pointing towards enhanced efficiency or potentially higher pricing power, thus earning a point. Given the additional comparison over the past 20 years, HCA's Gross Margin has shown significant consistency, fluctuating slightly each year but maintaining levels well above the industry median. For instance, in 2023, the industry median was 0.3298, a notable contrast to HCA's 0.8476. This trend underscores HCA Healthcare's superior operational efficiency within its sector, contributing positively to its financial foothold and affirming the positive trajectory observed this year.

Asset Turnover Ratio is growing?

Change in Asset Turnover is a profitability ratio evaluating the efficiency of a company’s use of its assets to generate sales.

The Asset Turnover ratio has increased from 1.1675 in 2022 to 1.1959 in 2023 for HCA Healthcare. This upward trend indicates that the company has become more efficient in utilizing its assets to generate revenue. Adding this metric’s value into a 20-year historical context, this ratio had peaked in 2011 at 1.281. Despite fluctuations, the recent increase is indicative of operational improvements. Hence, HCA Healthcare earns a point for this criterion in the Piotroski analysis.