UHS

UNIVERSAL HEALTH SERVICES INC holds a lower-quartile position (#41 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 64.3/100 places it at rank #331 in our full 7,333-stock universe. With a $13.0B market capitalization, UNIVERSAL HEALTH SERVICES INC operates at meaningful scale within the Services sector, providing competitive advantages in distribution, procurement, and customer reach.

The near-term outlook is constructive, with revenue growing at 15% and momentum in the 76th 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 35th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 54% (-5.6pp vs sector) narrow to operating margins of 11% (+7.5pp vs sector) and net margins of 7.9%, yielding a gross-to-net conversion rate of 15%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

We assign UNIVERSAL HEALTH SERVICES INC a Narrow Moat rating with a composite moat score of 45/100. The ROIC-WACC spread of +1.1% is the primary signal of economic value creation. The company possesses identifiable competitive advantages, though they are less entrenched than those of wide-moat peers. Our analysis indicates that UNIVERSAL HEALTH SERVICES INC can sustain above-average returns on invested capital for at least 10 years, with the strongest contributor being margin superiority at 13.1/20.

The strongest moat sources are margin superiority (13.1/20) and financial resilience (12.2/20). GM 54% vs sector 60%, OM 11% vs sector 4%. Interest coverage 13.6x, Net debt/EBITDA 6.8x. These pillars form the core of UNIVERSAL HEALTH SERVICES INC's competitive identity and are the primary drivers of excess returns in our framework.

Areas of relative weakness include reinvestment efficiency (1.9/20) and economic value creation (6/20). Capital turnover 0.98x. Improvement in these areas could meaningfully widen the moat over time, while deterioration would be an early warning of competitive erosion.

Our moat trend assessment is Stable. Multi-year ROIC and operating margin trajectories show neither meaningful improvement nor deterioration, suggesting the competitive position is steady. We expect UNIVERSAL HEALTH SERVICES INC's moat profile to remain largely unchanged absent a material shift in return on capital or industry dynamics.

At a current price of $229.96, UNIVERSAL HEALTH SERVICES INC appears undervalued relative to its fundamentals. Our value factor score of 74/100 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 10.8x (a 54% discount to the sector median of 23.7x), EV/EBITDA of 7.8x (discounted to peers), P/B of 2.0x, P/S of 0.9x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

Key profit drivers include gross margins of 54% providing a solid profitability foundation, operating margins of 11% reflecting effective cost management, robust top-line growth of 15% expanding the revenue base. The margin cascade from 54% gross to 11% operating to 7.9% net reveals the company's cost structure and reinvestment intensity. Our analysis indicates that the profit engine is high-quality and likely sustainable, with the quality factor at the 62th percentile.

The margin profile shows gross margins of 54%, operating margins of 11%, net margins of 7.9%. Return metrics include ROE of 18.4% and ROA of 8.7%. Relative to the Services sector, gross margins are 5.6 percentage points below the sector median of 60%, and ROE of 18.4% compares to a sector median of 5.3%.

The balance sheet reflects moderate leverage with D/E of 65%, a dividend yield of 0.39%, revenue growth of 15%. The sector median D/E is 0%, putting UNIVERSAL HEALTH SERVICES INC at higher leverage than the typical peer. Overall balance sheet health is adequate for the current business environment.

We assign a Low uncertainty rating to UNIVERSAL HEALTH SERVICES INC. The company exhibits strong financial stability with a beta of 0.62, and a stability factor in the 82th 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 0.62 — 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 82th percentile and quality factor at the 62th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 54% provide a buffer against cost pressures; above-average stability (82th 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 is favorable for long-term investors.

We rate UNIVERSAL HEALTH SERVICES INC's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 18.4%, and the balance sheet is managed within acceptable parameters (D/E: 65%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; UNIVERSAL HEALTH SERVICES INC falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 0.39% 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, UNIVERSAL HEALTH SERVICES INC receives a Hold rating with a composite score of 64.3/100 (rank #331 of 7,333). Our quantitative framework assigns a Narrow Moat (45/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 66/100.

Our analysis supports a neutral stance on UNIVERSAL HEALTH SERVICES INC. 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.