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Tenet Healthcare Corporation’s THC shares have surged 26.9% in the past year against the industry’s 2.2% decline. It has also outperformed the broader Zacks Medical sector’s 11% decline and the S&P 500’s 9.3% increase in the said time frame.

The company has been benefiting on the back of higher same-hospital admissions, a favorable payer mix and increased Medicaid supplemental revenues. Closing at $133.04 in the last trading session, the stock has a market cap of $12.7 billion.

Image Source: Zacks Investment Research

Growth Drivers for THC

Tenet Healthcare is sharpening its focus on ambulatory surgery centers to capitalize on the rising demand for outpatient services. Through its collaboration with United Surgical Partners International (“USPI”), the company is expanding its network, optimizing operations and driving profitability. By the end of the fourth quarter, USPI held ownership stakes in 518 ASCs and 25 surgical hospitals across 37 states.

In addition, Tenet Healthcare is investing in AI-driven technologies to enhance both clinical and administrative processes. These advancements aim to lower costs, reduce patient wait times and improve overall satisfaction, reinforcing the company’s commitment to efficiency and high-quality care.

Tenet Healthcare’s cash flow position further highlights its financial strength. In the trailing 12 months, the company generated $1.1 billion in free cash flow. Its price-to-free cash flow ratio is 11.43X, significantly lower than the broader medical sector’s average of 21.57X, indicating financial stability and effective capital management.

The company’s deleveraging strategy is also showing positive results. Tenet Healthcare ended the fourth quarter with $3 billion in cash and cash equivalents, more than double its year-end 2023 balance. At the same time, long-term debt (net of the current portion) fell 12.1% to $13.1 billion, with just $92 million classified as the current portion, ensuring manageable near-term obligations.

As a result of these efforts, Tenet Healthcare’s net debt-to-EBITDA ratio has improved to 2.61X, well below its five-year median of 4.64X and the industry average of 3.29X. For 2025, the company forecasts adjusted EBITDA to be between $3.975 billion and $4.175 billion, with the midpoint indicating 2% year-over-year growth. It also expects an adjusted EBITDA margin in the range of 19.3-19.9%. To further strengthen its financial position, Tenet Healthcare is likely to continue divesting non-core and underperforming assets, allowing for additional debt reduction and capital reinvestment.