Financial Review: Surgery Partners (SGRY) vs. Hospital Co. of America (HCA)

Surgery Partners (NASDAQ: SGRY) and Hospital Co. of America (NYSE:HCA) are both medical companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, earnings, analyst recommendations, valuation and dividends.

Dividends

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Hospital Co. of America pays an annual dividend of $1.40 per share and has a dividend yield of 1.4%. Surgery Partners does not pay a dividend. Hospital Co. of America pays out 21.2% of its earnings in the form of a dividend.

Profitability

This table compares Surgery Partners and Hospital Co. of America’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Surgery Partners -4.54% -0.53% -0.13%
Hospital Co. of America 4.89% -49.49% 7.21%

Insider and Institutional Ownership

73.5% of Hospital Co. of America shares are held by institutional investors. 7.6% of Surgery Partners shares are held by insiders. Comparatively, 2.8% of Hospital Co. of America shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Surgery Partners and Hospital Co. of America’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Surgery Partners $1.34 billion 0.62 -$52.98 million ($0.84) -20.42
Hospital Co. of America $47.65 billion 0.72 $2.22 billion $6.59 14.83

Hospital Co. of America has higher revenue and earnings than Surgery Partners. Surgery Partners is trading at a lower price-to-earnings ratio than Hospital Co. of America, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings for Surgery Partners and Hospital Co. of America, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Surgery Partners 1 3 4 0 2.38
Hospital Co. of America 2 6 15 0 2.57

Surgery Partners presently has a consensus price target of $17.67, indicating a potential upside of 3.01%. Hospital Co. of America has a consensus price target of $105.83, indicating a potential upside of 8.31%. Given Hospital Co. of America’s stronger consensus rating and higher possible upside, analysts clearly believe Hospital Co. of America is more favorable than Surgery Partners.

Risk & Volatility

Surgery Partners has a beta of 1.8, meaning that its share price is 80% more volatile than the S&P 500. Comparatively, Hospital Co. of America has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500.

Summary

Hospital Co. of America beats Surgery Partners on 12 of the 16 factors compared between the two stocks.

Surgery Partners Company Profile

Surgery Partners, Inc. is healthcare services holding company, which engages in the provision of solutions for surgical and related ancillary care in support of its patients and physicians. It operates through the following business segments: Surgical Facility Services; Ancillary Services; and Optical Services. The Surgical Facility Services segment consists of the operation of ambulatory surgery centers and surgical hospitals, and includes the anesthesia services of the company. The Ancillary Services segment operates a diagnostic laboratory and multi-specialty physician practices. The Optical Services segment involves an optical laboratory and an optical products group purchasing organization. The company was founded in 2004 and is headquartered in Nashville, TN.

Hospital Co. of America Company Profile

HCA Healthcare, Inc., through its subsidiaries, provides health care services. The company operates general, acute care hospitals that offer medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic, and emergency services; and outpatient services, such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology, and physical therapy services. It also operates psychiatric hospitals, which provide therapeutic programs comprising child, adolescent and adult psychiatric care, and adolescent and adult alcohol and drug abuse treatment and counseling. In addition, the company operates outpatient health care facilities consisting of freestanding ambulatory surgery centers, freestanding emergency care facilities, urgent care facilities, walk-in clinics, diagnostic and imaging centers, rehabilitation and physical therapy centers, radiation and oncology therapy centers, physician practices, and various other facilities. As of February 12, 2018, it owned and operated 179 hospitals and 120 freestanding surgery centers, and various other healthcare facilities in 20 states and the United Kingdom. The company was formerly known as HCA Holdings, Inc. HCA Healthcare, Inc. was founded in 1968 and is headquartered in Nashville, Tennessee.

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