Technological advancements, including AI, telemedicine, wearables, and robotics, are boosting the medical industry. Therefore, quality medical stocks Encompass Health Corporation (EHC), Tenet Healthcare Corporation (THC), and HCA Healthcare, Inc. (HCA), which are poised for steady gains, could be worth a look.

The U.S. healthcare system faces a growing demand-supply gap due to an aging population and limited resources. Also, the demand for well-equipped hospitals is driven by the increasing need for better patient care and advancements in healthcare technology.

The U.S. hospital facilities market, valued at $1.4 trillion in 2022, is expected to grow at a CAGR of 7.7% from 2023 to 2030.

Additionally, the digital health industry is thriving, thanks to technological advancements, government support, and increased investments. The rapid proliferation of tablets, smartphones, and other mobile platforms has significantly contributed to the growth of the digital health industry.

Notably, the global digital healthcare market is projected to expand at a CAGR of 23.7%, reaching $1.30 trillion by 2030.

Furthermore, surging cases of drug abuse, alcoholism, and depression, are boosting demand for rehabilitation services. Additionally, 11% of older patients are referred to rehabilitation facilities to improve functionality and mobility after hospitalization, further supporting market expansion.

As a result, the global medical rehabilitation services market is expected to grow at a 6.1% CAGR from 2022 to 2030.

Considering these conducive trends, let's take a look at the fundamentals of the three best Medical – Hospitals stocks, starting with number 3.

Stock #3: Encompass Health Corporation (EHC)

EHC provides post-acute healthcare services in the United States. It provides specialized rehabilitative treatment on an inpatient basis to patients who have experienced physical or cognitive disabilities or injuries due to medical conditions, such as strokes, hip fractures, and various debilitating neurological conditions.

EHC’s trailing-12-month EBIT and EBITDA margins of 15.10% and 20.82% are higher than the 0.35% and 5.25% industry averages.

On September 13, 2023, EHC and Piedmont announced the opening of the Rehabilitation Hospital of Columbus, a 40-bed inpatient rehabilitation hospital located at 8321 Veterans Parkway in Columbus, Georgia.

The hospital serves patients recovering from debilitating illnesses and injuries, including strokes and other neurological disorders, brain injuries, spinal cord injuries, amputations, and complex orthopedic conditions.

On July 20, 2023, EHC declared a quarterly cash dividend on its common stock of $0.15 per share, payable on October 16, 2023. EHC pays $0.60 annually as dividends, which translates to a yield of 0.88% at the current price. Its four-year average dividend yield is 1.53%.

EHC’s net operating revenues increased 11.7% year-over-year to $1.19 million in the second quarter that ended June 30, 2023. Its adjusted EBITDA increased 27.1% year-over-year to $249.60 million and its adjusted earnings per share increased 50.8% year-over-year to $0.95.

Analysts expect EHC’s EPS and revenue to rise 13.7% and 9.5% year-over-year to $0.76 and $1.19 billion in the current quarter ending September 2023. Additionally, EHC has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 34.1% over the past year to close the last trading session at $67.97.

EHC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

EHC has a B grade for Growth and Sentiment. It is ranked #5 among ten stocks in the B-rated Medical – Hospitals industry.

To access EHC’s additional POWR Ratings for Momentum, Value, Quality, and Stability, click here.

Stock #2: Tenet Healthcare Corporation (THC)

THC operates as a diversified healthcare services company. The company operates through three segments, Hospital Operations; Ambulatory Care; and Conifer.

THC’s trailing-12-month EBIT and EBITDA margins of 14.13% and 18.36% are higher than the 0.35% and 5.25% industry averages.

In the fiscal second quarter ended June 30, 2023, THC’s net operating revenues increased 9.6% year-over-year to $5.08 million. Its adjusted EBITDA amounted to $843 million and EPS available to THC common shareholders increased 228.6% year-over-year to $1.15.

THC’s revenue for the current quarter ending September 30, 2023, is expected to increase 4.7% year-over-year to $5.02 billion. It has surpassed EPS estimates in each of the trailing four quarters.

Shares of THC have gained 56.8% over the past nine months to close the last trading session at $69.78.

THC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has a B grade for Growth and Value. Within the same industry, it is ranked #4.

Beyond what is stated above, we’ve also rated THC for Stability, Sentiment, Quality, and Momentum. Get all THC ratings here.

Stock #1: HCA Healthcare, Inc. (HCA)

HCA is a healthcare services company that owns and operates general and acute care hospitals offering medical, surgical, emergency, and outpatient services. In addition, the company operates in two geographically organized groups: The National and American Groups.

HCA’s trailing-12-month EBIT and EBITDA margins of 15% and 19.88% are higher than the 0.35% and 5.25% industry averages.

On August 29, HCA and Google Cloud announced a new collaboration designed to use generative AI technology to improve workflows on time-consuming tasks, such as clinical documentation, so physicians and nurses can focus more on patient care.

On July 27, 2023, HCA declared a quarterly cash dividend on its common stock of $0.60 per share, payable on September 29, 2023. While its four-year average dividend yield is 0.83%, HCA pays $2.40 annually as dividends, which translates to a yield of 0.94% at the current price.

During the fiscal second quarter that ended June 30, 2023, HCA’s revenues increased 5% year-over-year to $15.86 billion. Its adjusted EBITDA rose marginally from the year-ago quarter to $3.06 billion, while its EPS improved 10% year-over-year to $4.29.

Street expects HCA’s revenue and EPS for the fiscal third quarter (ending September 2023) to increase 5.9% and 3.5% year-over-year to $15.85 billion and $4.07, respectively. Moreover, it surpassed the EPS estimates in three of the trailing four quarters.

The stock has gained 22.6% over the past year to close the last trading session at $256.68.

HCA’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system.

It has a B grade for Stability, Value, and Sentiment. Within the same industry, it is ranked first.

Click here to see the other ratings of HCA for Growth, Momentum, and Quality

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HCA shares were trading at $254.70 per share on Monday morning, down $1.58 (-0.62%). Year-to-date, HCA has gained 6.87%, versus a 16.97% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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