Analyst Paula Torch at Avondale Partners says investors shouldn't be tempted right away to take advantage of the 30 percent slide in shares of Community Health Systems following the company's spinout of Quorum Health Corp. two weeks ago. There are too many reasons - an unclear outlook, reimbursement pressures and continued struggles at former HMA hospitals - to not be enthusiastic, she says, and has lowered her price target to $14 from $18. CHS (Ticker: CYH) is changing hands today at $12.55.
Keeping her rating at 'market perform,' Torch points out that CHS now trades at 6.2 times her expected adjusted EBITDA estimate versus a peer peer average of 7 times. That number won't rise much in the near time.
"We are taking a more conservative approach to EBITDA given historical execution as we believe there are a number of moving parts to the EBITDA bridge and timing of improvements may be uncertain," she wrote.
Looking ahead to 2017, Torch sees revenues at almost $17.6 billion, 3 percent below analysts' consensus estimates but just about in line with the consensus on EBITDA because she expects better cost management trends.
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