| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 3/6 |
| Past Performance | 0/6 |
| Financial Health | 0/6 |
| Dividends | 0/6 |
CYH Stock Overview
Community Health Systems, Inc. owns, leases, and operates general acute care hospitals in the United States.
Community Health Systems, Inc. Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$3.74 |
| 52 Week High | US$15.29 |
| 52 Week Low | US$2.81 |
| Beta | 1.76 |
| 1 Month Change | 2.75% |
| 3 Month Change | -42.37% |
| 1 Year Change | -69.37% |
| 3 Year Change | 78.10% |
| 5 Year Change | -46.80% |
| Change since IPO | -72.68% |
Recent News & Updates
Community Health Systems: Operating Value Erosion Continues
Community Health Systems continues to demonstrate challenges in the investment debate on multiple layers. Quarterly operating metrics have been eroding over the past 5 years to date and trends continued last quarter. Sector-weaknesses look to continue in FY22 as well, with pressures on nursing staff turnover, labour costs and COVID-19. On the culmination of these factors, we rate CYH neutral at a $2.44 valuation until proven otherwise. Investment Summary The quest to identify selective opportunities within healthcare and medical technology universe continues in H2 FY22. As we move to shift up the quality spectrum, bottom-line growth trends are now more important than ever to remain buoyant in the forward looking regime. With that, we note Community Health Systems, Inc. (CYH) exhibits a number of potential headwinds whilst continuing its erosion of operating value on a quarterly basis. With little flesh to put on the skeleton here, we rate CYH neutral at a $2.44 per share valuation until evidence presents to re-rate to the upside. Exhibit 1. CYH 6-month price action = bearish Data: Refinitiv Eikon Q2 earnings show major slowdown It was more than a challenging year for the company, and CEO Tim Hingtgen's opening remarks from the earnings call spell out the tone for the rest of the presentation: The second quarter was challenging in many regards, as we navigated through a particularly complex operating environment, but simply stated, we did not achieve the results we had expected." Consolidated revenue came in at ~$2.9 billion, representing a 260bps YoY decline a same store basis, below the national industry average in July of 4.1% YoY. The company also recognized a 210bps YoY decrease in net-revenue per admission, brought on by smaller non-patient revenue from the quarter. Contract labour came in at ~10% of the total labour cost to $150 million, up from $50 million in Q2 FY21, although, was down ~300bps on previous quarter. However, pre-pandemic contract labour was just 2%, so it has a way to go in bringing it back to range. Helping the cause, is that CYH's nursing retention rate, it is still lower than pre-Covid. In other words, nursing staff turnover has increased above pre-pandemic, despite management slashing staff turnover by ~50% in the quarter. Non-GAAP EBITDA came in to $253 million, with ~$8 million of Covid-relief funds ($0.06/share). EBITDA margins tightened to 8.4%. Moving down the P&L, labour expenses – costs, and contract labour expense – continued to spike in Q2 FY22. Average hourly rate per-employee gained 8.5% YoY, although was down ~40bps sequentially. Management expects labour inflation to remain flat for the remainder of H2 FY22. As seen in Exhibit 2, investors have realized an ongoing pattern of quarterly value erosion from top-bottom. In particular, operating income and FCF have narrowed over the past few quarters, whilst investors currently realize a negative 14% yield on these cash flows. Exhibit 2. Incremental erosion of operating value over the past 7-years to date on a quarterly basis Data: HB Insights, CYH SEC Filings Capital expenditures ("CAPEX") also decreased 9% YoY to $191 million, down from $212 million in Q2 FY21. The return on CYH's invested capital has dwindled on a quarterly basis and came in at 1.76% last quarter. As seen in Exhibit 3, ROIC has pushed lower in the last 2 quarters as well, below 3-year quarterly averages of 3.3% on Q2 FY22 NOPAT of $111. Quarterly NOPAT conversion normalizes to $226 million over this time hence this was a below-average result as well. Moreover, CYH's WACC is 7.4%, and the annualized ROIC of ~7.04% fails to meet this level. We need to see further uplift in ROIC to justify the investment case for CYH. Exhibit 3. CYH's return on investment has curled down since Q4 FY21 Data: HB Insights, CYH SEC Filings Meanwhile, management was able to upgrade guidance for the full year. It now expects net operating revenues to be ~$12.2–$12.5 billion, down from previous estimates. It also projects ~$1.4 billion in EBITDA for the year and for this to carry to a net EPS loss of $2.55 at the upper end. It also forecasts CFFO of ~$500–$600 million – an entire $100 million of variance – whereas CAPEX is tipped to reduce to $400–$450 million. Management notes the downspend in CAPEX stems from the inability to align its growth capital with the current labour market and the obvious economic conditions.
Community Health Systems EPS of -$2.52, revenue of $2.93B misses by $210M
Community Health Systems press release (NYSE:CYH): Q2 EPS of -$2.52 may not be comparable to consensus of $0.05. Revenue of $2.93B (-2.3% Y/Y) misses by $210M. Shares -43%. On a same-store basis, admissions decreased 3.5 percent and adjusted admissions decreased 0.5 percent, compared with the same period in 2021.
Shareholder Returns
| CYH | US Healthcare | US Market | |
|---|---|---|---|
| 7D | 6.3% | 2.4% | 3.2% |
| 1Y | -69.4% | 17.7% | -10.1% |
Return vs Industry: CYH underperformed the US Healthcare industry which returned 15.6% over the past year.
Return vs Market: CYH underperformed the US Market which returned -11.7% over the past year.
Price Volatility
| CYH volatility | |
|---|---|
| CYH Average Weekly Movement | 17.9% |
| Healthcare Industry Average Movement | 8.8% |
| Market Average Movement | 7.7% |
| 10% most volatile stocks in US Market | 16.9% |
| 10% least volatile stocks in US Market | 3.2% |
Stable Share Price: CYH is more volatile than 90% of US stocks over the past 3 months, typically moving +/- 18% a week.
Volatility Over Time: CYH's weekly volatility has increased from 12% to 18% over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1985 | 58,500 | Tim Hingtgen | https://www.chs.net |
Community Health Systems, Inc. owns, leases, and operates general acute care hospitals in the United States. It offers general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric, and rehabilitation services, as well as skilled nursing and home care services. The company also provides outpatient services at primary care practices, urgent care centers, free-standing emergency departments, ambulatory surgery centers, imaging and diagnostic centers, retail clinics, and direct-to-consumer virtual health visits.
Community Health Systems, Inc. Fundamentals Summary
| CYH fundamental statistics | |
|---|---|
| Market Cap | US$482.96m |
| Earnings (TTM) | -US$39.00m |
| Revenue (TTM) | US$12.39b |
0.0x
P/S Ratio-12.4x
P/E RatioIs CYH overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| CYH income statement (TTM) | |
|---|---|
| Revenue | US$12.39b |
| Cost of Revenue | US$7.33b |
| Gross Profit | US$5.06b |
| Other Expenses | US$5.10b |
| Earnings | -US$39.00m |
Last Reported Earnings
Jun 30, 2022
Next Earnings Date
n/a
| Earnings per share (EPS) | -0.30 |
| Gross Margin | 40.87% |
| Net Profit Margin | -0.31% |
| Debt/Equity Ratio | -1,031.4% |
How did CYH perform over the long term?
See historical performance and comparison