HCA Healthcare, Inc.HCANYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $1,142.62 per share(market-calibrated)

+110.9%

Upside to Fair Value

Current

$541.80

Pure Model

$1,195.22

Fair Value

$1,142.62

Bull Case

$1,572.90

Bear Case

$871.45

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $1,195.22.

What's Driving This Ratingfor HCA

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.96% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$3.2B in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 16.47% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $24.3B (18.84% margin).

→

Moderate revenue growth

Analyst consensus projects 3.97% revenue growth, fading to 3.00% by Year 10. Revenue reaches $129.0B (vs $75.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $870.95/share (18.9x terminal FCF) while exit multiple gives $1,519.48/share (35.8x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 66.96% indicates efficient cash generation. FCF reaches $19.9B by Year 10 (15.40% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.36

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.64%

Cost of Debt

Pre-tax Cost of Debt3.79%

Tax Rate20.85%

After-tax Cost of Debt3.00%

Equity Weight (E/V)71.35%

Debt Weight (D/V)28.65%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (71.35% × 10.64%) + (28.65% × 3.00%)

= 8.45%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$78.6B	$86.9B	$100.4B	$114.4B	$129.0B
EBIT	$12.9B	$14.3B	$16.5B	$20.3B	$24.3B
Tax	$2.7B	$3.0B	$3.4B	$4.2B	$5.1B
NOPAT	$10.2B	$11.3B	$13.1B	$16.1B	$19.2B
+ Depreciation	$3.3B	$3.6B	$4.2B	$4.8B	$5.4B
- Capex	$4.7B	$4.7B	$4.9B	$4.9B	$4.5B
- Δ NWC	$178M	$267M	$459M	$397M	$222M
Free Cash Flow	$8.7B	$10.0B	$11.9B	$15.5B	$19.9B
Discount Factor	0.922	0.784	0.666	0.567	0.444
Present Value	$8.0B	$7.8B	$7.9B	$8.8B	$8.8B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$19.9B

Terminal Growth Rate3.00%

WACC8.45%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$375.3B

PV of Terminal Value$166.7B

Exit Multiple Method

Year 10 EBITDA$29.7B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$712.1B

PV of Terminal Value$316.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$83.4B

PV of Terminal Value$166.7B

Enterprise Value$250.1B

(-) Net Debt$49.2B

Equity Value$200.9B

Shares Outstanding231M

Price per Share$870.95

Exit Multiple Method

PV of Projected FCFs$83.4B

PV of Terminal Value$316.3B

Enterprise Value$399.7B

(-) Net Debt$49.2B

Equity Value$350.6B

Shares Outstanding231M

Price per Share$1,519.48

Pure Model Fair Value

$1,195.22

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
6.45%	$1,542.56	$1,612.23	$1,702.07	$1,822.34	$1,991.65
7.45%	$1,312.51	$1,354.25	$1,405.37	$1,469.42	$1,552.01
8.45%	$1,136.27	$1,163.27	$1,195.22	$1,233.62	$1,280.65
9.45%	$994.50	$1,012.92	$1,034.21	$1,059.07	$1,088.48
10.45%	$876.72	$889.81	$904.66	$921.64	$941.25

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$871.45

60.8% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.71

Base Case

$1,195.22

120.6% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.36

Bull Case

$1,572.90

190.3% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.16

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth3.97%

Year 3 Revenue Growth5.47%

Year 5 Revenue Growth8.36%

Year 7 Revenue Growth6.22%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin16.47%

Terminal EBIT Margin20.00%

Tax Rate20.85%

Historical Capex / Rev5.96%

Terminal Capex / Rev3.50%

NWC / Revenue5.92%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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