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February 19, 2007

Searching for a Hospital Buyout

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Every now and then hospitals become attractive buyout targets because of their strong cash flow and capital expenditure. However, they do not come without risks as they sometimes face collection problems from insurers and various health programs. In the last month Triad Hospitals was taken private by principal investors CCMP Capital advisors and by a entity of the Goldman Sachs group. When the buyout tool place of Triad Hospitals, there stock rose about 15%. However, as others look towards finding another Hospital buyout there are few options left as two of the three biggest publicly traded chains have gone private. However, one company that still seems to be a worthy investment is Community Health Systems (CYH).

Why does CYH look like a buy?

With their earnings call just last week, Community Health 4th quarter profits rose by 11%. Recently, shares have been accumulated by financial institutions which are a favorable signs for a large company like Community Heath that has a 3.6B market cap. Furthermore, compared to its competitors it had the lowest PEG at 1.09 and the highest quarterly earnings growth, however, its PE at 22 is a little higher than the industry average. In the upcoming months I see CYH as a moderate growth stock with larger rewards possible if it comes under consideration for a buyout.

Posted by jcip at February 19, 2007 10:27 PM