Guggenheim sets $16 target for Ardent Health stock, rates Buy

On Wednesday, Guggenheim initiated coverage on Ardent Health Partners Inc (NYSE:ARDT) with a Buy rating and a price target of $16.00. The company, currently trading near its 52-week low of $11.60, operates in rapidly growing markets, expanding at three times the national average. This growth is reflected in the company's impressive 10.29% revenue growth over the last twelve months. Despite this growth, the firm has recognized that Ardent Health has not fully capitalized on ambulatory care and access points. According to InvestingPro analysis, the company maintains a "GREAT" overall financial health score, suggesting strong operational fundamentals.

Ardent Health's leverage position, at 2.9 times lease-adjusted, is seen as favorable, enabling the company to enhance its outpatient strategy. This strategy aims to reduce system leakage and capitalize on the flow of ambulatory and access volumes to Ardent Health's inpatient settings. The company's solid financial position is evidenced by its healthy gross profit margin of 57.51% and current ratio of 1.94. Guggenheim notes significant margin benefits from New Mexico and Oklahoma Disproportionate Share Hospital (DSH) programs, with management indicating the potential for an additional 100-200 basis points of margin expansion over the next three to four years. This would align Ardent Health more closely with its public hospital peers.

However, the analyst acknowledged certain challenges, including uncertainty around Medicaid funding, a limited float following the company's initial public offering (with 81% ownership retained by private equity and Ventas (NYSE:VTR)), and a three to four-year timeline for margin expansion. Additionally, the analyst pointed out that the current lack of favorable fundamental considerations within the industry could pose a risk.

Despite these concerns, Guggenheim finds the current valuation of Ardent Health's shares, at approximately four times EBITDA-NCI, to be significantly discounted compared to the peer group average of around 7.2 times. This view is supported by the company's attractive P/E ratio of 9.28x and EV/EBITDA of 6.89x. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation, with analyst price targets ranging from $17 to $24. This underpinning of value is the primary reason for the positive outlook and Buy rating on Ardent Health's stock. The firm believes the stock's current discounted valuation is too significant to overlook, leading to their constructive stance on the shares. Discover more detailed valuation insights and 6 additional ProTips with an InvestingPro subscription.

In other recent news, Ardent Health Partners reported strong financial results for the fourth quarter of 2024, showing a 19% increase in revenue, reaching $1.6 billion, and a 213% rise in adjusted EBITDA to $183 million. These results were attributed to strategic operational improvements and technological advancements. Mizuho (NYSE:MFG) Securities adjusted its outlook on Ardent Health, reducing the price target from $21.00 to $19.00, while maintaining an Outperform rating, reflecting the company's revised guidance and strategic decisions. Similarly, RBC Capital Markets also lowered its price target for Ardent Health to $21 from $23 but reiterated an Outperform rating, citing the company's solid fourth-quarter performance and promising start to 2025. Despite potential risks associated with Medicaid, RBC Capital expressed confidence in Ardent Health's ability to navigate these challenges. The company's full-year revenue for 2024 reached $5.97 billion, marking a 10% increase from 2023. Looking ahead, Ardent Health has set a revenue guidance range of $6.2 billion to $6.45 billion for 2025, with an expected adjusted EBITDA between $575 million and $615 million.

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