We provided an update on our position in HCA in August, following a stronger-than-expected quarterly result. At the time we said; ‘While we retain our neutral stance on HCA around $US400, we do think the momentum is improving in the business and HCA can now justify a valuation at the upper end of its current range’.
At the time, HCA was trading ~$US400/sh. Since then, the stock has rallied to $US460/sh and once again has us contemplating whether we should be selling down our holding on valuation grounds, in what’s a relatively low growth business, generally trading between ~12-15x earnings over time. HCA now trades on 15.7x, over 1 standard deviation on the expensive side.
We are likely to take profit on HCA ~$US460
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