NHC

We rate NATIONAL HEALTHCARE CORP (NHC) as a Hold with a composite score of 62.9/100 at a current price of $157.21. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (92th percentile) and momentum (87th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (27th percentile) and quality (55th percentile) tempers our overall conviction. We assign a Narrow Moat rating (55/100), Low uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

NATIONAL HEALTHCARE CORP holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 62.9/100 places it at rank #431 in our full 7,333-stock universe. At $1.9B in market capitalization, NATIONAL HEALTHCARE CORP is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 27% and momentum in the 87th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 27th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 39% (-20.6pp vs sector) narrow to operating margins of 8% (+4.4pp vs sector) and net margins of 9.6%, yielding a gross-to-net conversion rate of 25%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $157.21, NATIONAL HEALTHCARE CORP appears undervalued relative to its fundamentals. Our value factor score of 75/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 17.5x (a 26% discount to the sector median of 23.7x), EV/EBITDA of 15.8x (at a premium), P/B of 2.3x, P/S of 1.7x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to NATIONAL HEALTHCARE CORP. The company exhibits strong financial stability with a beta of 0.43, conservative leverage (7% D/E), and a stability factor in the 92th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.43 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 92th percentile and quality factor at the 55th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (7% D/E) limits balance sheet risk; above-average stability (92th percentile) suggests predictable business dynamics; a 2.06% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate NATIONAL HEALTHCARE CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 13.2%, and the balance sheet is managed within acceptable parameters (D/E: 7%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; NATIONAL HEALTHCARE CORP falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 2.06% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, NATIONAL HEALTHCARE CORP receives a Hold rating with a composite score of 62.9/100 (rank #431 of 7,333). Our quantitative framework assigns a Narrow Moat (55/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 67/100.

Our analysis supports a neutral stance on NATIONAL HEALTHCARE CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.