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“The combination of strong markets and a positive hospital macro backdrop (repricing, improving vols, moderating labor) gives us visibility into margins normalizing over time and creating a multi-year growth story,” the analysts wrote.
The firm sees significant embedded earnings power from Acute Care normalization/repricing while they wait for the behavioral business to reaccelerate.
“Getting back to pre-COVID EBITDA margins implies a $600m+ (37%) opportunity for UHS vs 2023. UHS currently trades around 8x (near the midpoint of the 6-9x range over the past five years) but if margins and behavioral growth normalize there could also be upside to the multiple,” said the analysts.
