THC

We rate TENET HEALTHCARE CORP (THC) as a Hold with a composite score of 63.6/100 at a current price of $237.56. 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 momentum (85th percentile) and value (71th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (36th percentile) and quality (57th percentile) tempers our overall conviction. We assign a Narrow Moat rating (62/100), High uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. 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.

TENET 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 63.6/100 places it at rank #382 in our full 7,333-stock universe. With a $17.9B market capitalization, TENET HEALTHCARE CORP operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 4% and favorable momentum (85th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 58% (-1.6pp vs sector) narrow to operating margins of 18% (+14.4pp vs sector) and net margins of 11.5%, yielding a gross-to-net conversion rate of 20%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $237.56, TENET HEALTHCARE CORP appears undervalued relative to its fundamentals. Our value factor score of 71/100 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 8.4x (a 65% discount to the sector median of 23.7x), EV/EBITDA of 5.4x (discounted to peers), P/B of 3.4x, P/S of 1.0x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a High uncertainty rating to TENET HEALTHCARE CORP. Key risk factors include significant leverage (344% debt-to-equity). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (344% debt-to-equity). 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 64th percentile and quality factor at the 57th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 58% provide a buffer against cost pressures; above-average stability (64th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate TENET HEALTHCARE CORP's capital allocation as Poor. Key concerns include elevated leverage (344% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — TENET HEALTHCARE CORP significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, TENET HEALTHCARE CORP receives a Hold rating with a composite score of 63.6/100 (rank #382 of 7,333). Our quantitative framework assigns a Narrow Moat (62/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a neutral stance on TENET 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.