FINANCIAL ANALYSIS: UNIVRESAL HEALTH SERVICES (NYSE: UHS)2
Universal Health Services, Inc is a hospital management company that is among the most
respected and also one of the largest in the United Sates. The company has several acute care
hospitals, behavioral health facilities, and ambulance centers, which are located nationwide in
the United States, in Puerto Rico, and also in United States Virgin Islands. The company’s
headquarters is located in Pennsylvania. In this paper, the main focus will be a financial analysis
of Universal Health Service Company. The financial analysis will be based on the financial
statements of three consecutive financial years. These include the financial years of 2009, 2010,
and finally 2011. This analysis will aid the investors in the determination of the ability to invest
in the company. It will also be helpful for the employees for assurance of job security. In the case
of the shareholders, the financial analysis will be very helpful in the determination of the
company’s return on their capital.
The first aspect of analysis of the company will focus on the total revenues of the
company. From the financial statements of the three financial years, there was a general increase
in the company’s total revenue. During the financial year of 2009, the company made total
revenue of $4,693.8 million. During the following financial year, the year ending December
2010, the company realized total revenue of $4,900.0 million. In the final year of analysis, the
financial year ending 31 Dec, 2011, the total revenue of the company was $6,760.2 million. The
overall implication of the above data is a clear indication that shows that the company’s total
revenue progressively increased during the three financial years.
The second aspect of analysis is the gross profit of the company. In the case of the
company’s gross profit, a regular trend of gross profit increased was recorded. In the first
financial year of 2009, the company’s gross profit recorded was $1,790.1 million. In the second
FINANCIAL ANALYSIS: UNIVRESAL HEALTH SERVICES (NYSE: UHS)3
financial year of analysis, 2010, the company realized a gross profit whose value was $1,819.8
million. In the third financial year, the financial year ending 3rd Dec, 2011, the company’s
recorded gross profit was $2,628.4 million. The three consecutive financial years reported a
continuous and progressive increase in the gross profit of the company, thus, indicating the good
financial performance of the company.
The next analysis will focus on the operating expense of the company. There was no
regular trend in the company’s operating expenses over the three consecutive financial years.
During the financial year of the analysis, the total operating expenses of the company were
$1,269.6 million. In the second financial year of analysis, the financial year ending 31 Dec 2010,
the company’s total operating expenses amounted to $1,260 million, and the third financial year
of analysis that ended on 31 December 2011 involved total operating expenses that amounted to
$1,731.2 million.
The next aspect of financial analysis of the company is the operating income. The
operating income of the company displayed a regular upward trend, in that the operating income
increased from the first financial year of analysis through to the third financial year. In the first
financial year of 2009, the operating income of the company was $520.5 million. In the second
financial year of analysis, the financial year ending December 31, 2010, the company’s operating
income was $558.9 million. Finally, the financial year of 2011, the company’s operating income
amounted to $897.1 million.
The next aspect of analysis is the net income of the company. Though the trend of the net
income of the company did not follow a regular pattern, there was a registration of net income in
each of the three financial years. In the first financial year of analysis, the company received a
FINANCIAL ANALYSIS: UNIVRESAL HEALTH SERVICES (NYSE: UHS)4
net income that amounted to $260.4 million. During the next financial year, the second financial
year of analysis, the company realized a net income hat amounted to $230.2 million. Finally, on
the third financial year, the company’s net income realized amounted to $398.2 million. The
overall analysis of the above net income figures is a strong indication of the healthy financial
performance of the company, since each of the financial years realized net income.
The next aspect of analysis focuses on the company’s financial ratios. The financial ratios
addressed include current ration, quick ratio, and debt-to-equity ratio. These ratios would be very
helpful in the decision making directions of investors interested in the company (Carmichael, &
Graham, 2012). The company’s quick ratio is 1.2, the current ratio is 1.5, and the debt-to-equity
ratio is 104.4. All the three ratios of the company are clear indicators that the company is in a
healthy financial performance and can thus; settle its short-term debts with no major problems
(Palepu, & Healy, 2008).
From the information on the above several analyses, it can be concluded that the
company is in a healthy financial state. This is based on the company’s ability to record net
income and also the information conveyed by the financial ratios, whose values indicates that the
company can be able to meet its short-term financial obligations without much difficulty. This
thus will give confidence for investors so that they can invest in the company (Baker, & Powell,
2005). It will also imply employee motivation since employees feel that the company is
performing in a way that enhances their job security, and for the shareholders, the trend of the
country’s financial stability and its ability to earn net income is a clear assurance of the return on
capital invested.
FINANCIAL ANALYSIS: UNIVRESAL HEALTH SERVICES (NYSE: UHS)5
A notable trend in the current healthcare sector is the issue of the increase in the health
care costs (Wahlen, Jones, & Pagach, 2013). The implication on the company’s financial
performance will be a decrease in the total revenue of the company. It is thus very vital that the
company focuses on strategies that will aid in addressing of the issue of health care cost, which is
on a rise. A strategy that could be applied to counter such a trend can be the expansion of the
operations of the company, which will enhance the expansion of the revenue base for the
company. This will lead to the generation of more revenue by the company.
Better financial performance should be enhanced in the company through establishment
of financial selection systems. Such a good system is finance systems investment. This system
will be helpful in a number of ways. It accelerates the process for the selection of vendors, aids
in vendor selection criteria, and also aids in aligning the company’s financial requirement with
the capabilities of the systems that are in place in the company
Jermaine Byrant
Nicole Johnson
OVER
RATING
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