Universal Health Services, Inc.UHSNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $768.39 per share(market-calibrated)

+272.2%

Upside to Fair Value

Current

$206.42

Pure Model

$808.85

Fair Value

$768.39

Bull Case

$1,018.43

Bear Case

$624.80

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: $808.85.

What's Driving This Ratingfor UHS

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.94% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$354M in annual FCF. This is the biggest driver of long-term cash flow improvement.

↑

Margin expansion modeled

Current EBIT margin is 9.84% — below the sector mature average of 20.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.3B (17.34% margin).

→

Moderate revenue growth

Analyst consensus projects 6.06% revenue growth, fading to 3.00% by Year 10. Revenue reaches $24.5B (vs $17.4B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $610.02/share (21.4x terminal FCF) while exit multiple gives $1,007.68/share (38.2x 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 62.76% indicates efficient cash generation. FCF reaches $3.2B by Year 10 (12.97% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.27

Market Risk Premium4.50%

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

Cost of Equity (Re)10.21%

Cost of Debt

Pre-tax Cost of Debt2.78%

Tax Rate23.37%

After-tax Cost of Debt2.13%

Equity Weight (E/V)70.44%

Debt Weight (D/V)29.56%

WACC Calculation

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

WACC = (70.44% × 10.21%) + (29.56% × 2.13%)

= 7.82%

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	$18.4B	$20.1B	$21.2B	$22.4B	$24.5B
EBIT	$1.8B	$2.0B	$2.5B	$3.3B	$4.3B
Tax	$423M	$463M	$587M	$776M	$994M
NOPAT	$1.4B	$1.5B	$1.9B	$2.5B	$3.3B
+ Depreciation	$612M	$669M	$704M	$746M	$816M
- Capex	$910M	$930M	$910M	$894M	$859M
- Δ NWC	$52M	$42M	$30M	$32M	$35M
Free Cash Flow	$1.0B	$1.2B	$1.7B	$2.4B	$3.2B
Discount Factor	0.927	0.798	0.686	0.590	0.471
Present Value	$963M	$968M	$1.2B	$1.4B	$1.5B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.2B

Terminal Growth Rate3.00%

WACC7.82%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$67.9B

PV of Terminal Value$32.0B

Exit Multiple Method

Year 10 EBITDA$5.1B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$121.6B

PV of Terminal Value$57.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$12.2B

PV of Terminal Value$32.0B

Enterprise Value$44.2B

(-) Net Debt$5.4B

Equity Value$38.8B

Shares Outstanding64M

Price per Share$610.02

Exit Multiple Method

PV of Projected FCFs$12.2B

PV of Terminal Value$57.3B

Enterprise Value$69.4B

(-) Net Debt$5.4B

Equity Value$64.1B

Shares Outstanding64M

Price per Share$1,007.68

Pure Model Fair Value

$808.85

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%
5.82%	$1,052.17	$1,111.38	$1,191.59	$1,306.34	$1,387.99
6.82%	$885.81	$918.95	$960.77	$1,015.18	$1,088.87
7.82%	$763.60	$784.10	$808.85	$839.33	$877.78
8.82%	$667.83	$681.39	$697.27	$716.13	$738.91
9.82%	$589.65	$599.05	$609.83	$622.31	$636.94

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

$624.80

202.7% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.59

Base Case

$808.85

291.8% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.27

Bull Case

$1,018.43

393.4% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.08

Key Assumptions & Drivers• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth6.06%

Year 3 Revenue Growth4.50%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin9.84%

Terminal EBIT Margin20.00%

Tax Rate23.37%

Historical Capex / Rev4.94%

Terminal Capex / Rev3.50%

NWC / Revenue4.91%

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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