Assessing Tenet Healthcare After 51% Stock Surge and Deal to Sell Hospitals in California

If you have been eyeing Tenet Healthcare stock lately, you are not alone. Figuring out the right move can feel like standing at a crossroads, especially with healthcare stocks making bigger headlines in the market. After a stretch of explosive long-term growth, Tenet has been catching investors’ attention for good reason. Just check out the numbers: the stock has soared 554.6% over five years and 264.2% in just the past three years. Even this year, it is up a stunning 51.4% year-to-date. That sort of momentum does not happen by accident.

Of course, the last few weeks have not been all sunshine and roses. The stock dipped 6.6% over the past seven days and is down a modest 1.1% over 30 days. Some investors have started questioning whether this is a sign that Tenet is topping out or simply a healthy pause in a larger uptrend. Optimism in the healthcare sector has been a recurring theme this year, with many betting on policy support and changing patient care trends playing in Tenet’s favor. At the same time, there is growing scrutiny around valuations, and risk perceptions can shift quickly if sector sentiment softens.

But here is the interesting part: by classic valuation checks, Tenet Healthcare scores a remarkable 5 out of 6 when it comes to being undervalued. With so many boxes ticked, is the market missing something, or is it signaling that opportunity still exists despite the long run upward? In the next section, we will dig into these different valuation measures, and later on, I will share a smarter way to think about valuation that could give you an edge.

Tenet Healthcare delivered 21.7% returns over the last year. See how this stacks up to the rest of the Healthcare industry.

Approach 1: Tenet Healthcare Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) method calculates what a company is likely worth by projecting its future free cash flows and then discounting those amounts back to their value today. In Tenet Healthcare’s case, the analysis starts with its latest twelve months’ free cash flow, which stands at $1.62 billion. Looking ahead, analysts expect Tenet’s annual free cash flow to remain relatively stable, with projections as high as $1.70 billion by 2033, according to both analyst estimates for the next five years and long-term extrapolations beyond that.

These steady cash flows are run through a DCF model, using a two-stage approach in this case, which considers both short-term analyst forecasts and longer-term estimates calculated by Simply Wall St. The result is an estimated intrinsic value of $387.19 per share.

By this calculation, Tenet Healthcare is trading at a 51.0% discount to its intrinsic value, suggesting that the stock is significantly undervalued compared to what its future cash flows seem to justify. This substantial potential upside could offer an appealing risk-reward profile for investors who believe in the underlying business trajectory.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Tenet Healthcare.

Our Discounted Cash Flow (DCF) analysis suggests Tenet Healthcare is undervalued by 51.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Tenet Healthcare Price vs Earnings

The price-to-earnings (PE) ratio is a go-to metric when valuing profitable companies because it provides a straightforward snapshot of what investors are willing to pay for each dollar of earnings. The appeal of PE lies in its ability to connect a company’s stock price to its bottom line, making it a quick way to gauge whether a stock is reasonably valued compared to its current earnings stream.

However, what qualifies as a “normal” or “fair” PE ratio does not exist in a vacuum. Expectations for future earnings growth, the perceived risks in the business, and broader market sentiment all influence whether a higher or lower PE is justified. Companies with strong growth stories or lower risks tend to command higher PE multiples, while more uncertain outlooks or weaker growth prospects justify lower ones.

Tenet Healthcare currently trades at a PE ratio of 11.3x, which is notably below both the healthcare industry average of 21.4x and the peer group average of 20.2x. On the surface, this could suggest Tenet is undervalued. A more tailored assessment comes from Simply Wall St’s “Fair Ratio,” which incorporates specifics like earnings growth, industry context, profit margins, company size, and risk factors. For Tenet Healthcare, this proprietary Fair Ratio is 22.7x, indicating a more accurate representation of what investors should expect given the company’s overall profile. Comparing simplistic benchmarks with the Fair Ratio gives a deeper perspective because it adapts the valuation expectations to Tenet’s unique characteristics, rather than just fitting it into a broad industry category.

Since Tenet Healthcare’s current PE of 11.3x is significantly below the Fair Ratio of 22.7x, the evidence leans toward the stock being notably undervalued based on this approach.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Tenet Healthcare Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is the story you believe about a company, but it goes beyond gut feeling. It links your view of Tenet Healthcare’s future to clear, concrete numbers like revenue, earnings, and margins, then transforms that story into a fair value you can compare to the current share price.

On Simply Wall St’s Community page, Narratives are an easy tool used by millions of investors. You pick the assumptions that match your perspective, plug in your forecasts, and instantly see how your fair value stacks up. As news or earnings are released, Narratives update dynamically, giving you a living, breathing estimate so you are never stuck on last quarter’s data.

For example, with Tenet Healthcare, some investors see rapid technology adoption and strong market positioning, resulting in bullish fair values near $238 per share. Others are more cautious about regulatory risks or shrinking margins, arriving at bearish estimates around $160. Narratives empower you to compare these viewpoints, helping you decide if the market price offers enough upside for your conviction, all with transparency and context tailored to your story.

Do you think there's more to the story for Tenet Healthcare? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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