Shareholders of Tenet Healthcare would probably like to forget the past six months even happened. The stock dropped 20.1% and now trades at $124. This might have investors contemplating their next move.

Given the weaker price action, is now the time to buy THC? Find out in our full research report, it’s free.

Why Does Tenet Healthcare Spark Debate?

With a network spanning nine states and serving primarily urban and suburban communities, Tenet Healthcare (NYSE:THC) operates a nationwide network of hospitals, ambulatory surgery centers, and outpatient facilities providing acute care and specialty healthcare services.

Two Positive Attributes:

1. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Tenet Healthcare’s EPS grew at an astounding 34.7% compounded annual growth rate over the last five years, higher than its 2.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

2. New Investments Bear Fruit as ROIC Jumps

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Tenet Healthcare’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

One Reason to be Careful:

Same-Store Sales Falling Behind Peers

In addition to reported revenue, same-store sales are a useful data point for analyzing Hospital Chains companies. This metric measures the change in sales at brick-and-mortar locations that have existed for at least a year, giving visibility into Tenet Healthcare’s underlying demand characteristics.

Over the last two years, Tenet Healthcare’s same-store sales averaged 2.5% year-on-year growth. This performance slightly lagged the sector and suggests it might have to change its strategy or pricing, which can disrupt operations.

Final Judgment

Tenet Healthcare has huge potential even though it has some open questions. With the recent decline, the stock trades at 11.1× forward price-to-earnings (or $124 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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