Community Health Systems (NYSE: CYH) and HealthSouth Corporation (NYSE:HLS) are both medical companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, earnings, dividends, profitability, valuation and risk.

Risk & Volatility

Community Health Systems has a beta of 1.63, suggesting that its share price is 63% more volatile than the S&P 500. Comparatively, HealthSouth Corporation has a beta of 0.61, suggesting that its share price is 39% less volatile than the S&P 500.

Profitability

This table compares Community Health Systems and HealthSouth Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Community Health Systems -3.63% 0.07% 0.01%
HealthSouth Corporation 6.70% 25.07% 5.51%

Institutional and Insider Ownership

95.6% of Community Health Systems shares are held by institutional investors. Comparatively, 89.8% of HealthSouth Corporation shares are held by institutional investors. 4.6% of Community Health Systems shares are held by insiders. Comparatively, 1.6% of HealthSouth Corporation shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

HealthSouth Corporation pays an annual dividend of $0.96 per share and has a dividend yield of 2.2%. Community Health Systems does not pay a dividend. HealthSouth Corporation pays out 35.3% of its earnings in the form of a dividend. Community Health Systems has raised its dividend for 3 consecutive years.

Valuation & Earnings

This table compares Community Health Systems and HealthSouth Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Community Health Systems $17.48 billion 0.05 $1.78 billion ($5.71) -1.33
HealthSouth Corporation $3.77 billion 1.16 $817.10 million $2.72 16.32

Community Health Systems has higher revenue and earnings than HealthSouth Corporation. Community Health Systems is trading at a lower price-to-earnings ratio than HealthSouth Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and price targets for Community Health Systems and HealthSouth Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Community Health Systems 4 11 1 0 1.81
HealthSouth Corporation 1 2 5 0 2.50

Community Health Systems currently has a consensus price target of $7.67, indicating a potential upside of 1.23%. HealthSouth Corporation has a consensus price target of $48.80, indicating a potential upside of 9.93%. Given HealthSouth Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe HealthSouth Corporation is more favorable than Community Health Systems.

Summary

HealthSouth Corporation beats Community Health Systems on 9 of the 16 factors compared between the two stocks.

Community Health Systems Company Profile

Community Health Systems, Inc. is an operator of general acute care hospitals and outpatient facilities in communities across the country. The Company operates through hospital operations segment, which includes its general acute care hospitals and related healthcare entities that provide inpatient and outpatient healthcare services. The Company provides healthcare services through the hospitals that it owns and operates and affiliated businesses in non-urban and selected urban markets throughout the United States. The services provided through its hospitals and affiliated businesses include general acute care, emergency room, general and specialty surgery, critical care, internal medicine, obstetrics, diagnostic, psychiatric and rehabilitation services. The Company also provides additional outpatient services at urgent care centers, occupational medicine clinics, imaging centers, cancer centers, ambulatory surgery centers, and home health and hospice agencies.

HealthSouth Corporation Company Profile

HealthSouth Corporation (HealthSouth) is a provider of post-acute healthcare services, offering both facility-based and home-based post-acute services in 35 states and Puerto Rico through its network of inpatient rehabilitation hospitals, home health agencies and hospice agencies. The Company manages its operations through segments, including inpatient rehabilitation, and home health and hospice. It is an owner and operator of inpatient rehabilitation hospitals. It provides specialized rehabilitative treatment on both an inpatient and outpatient basis. It offers its home health and hospice services through Encompass Home Health and Hospice business (Encompass). Encompass operates home health and hospice agencies in 25 states, with concentrations in the Southeast, Oklahoma, and Texas. As of December 31, 2016, the Company operated 123 inpatient rehabilitation hospitals. As of December 31, 2016, the Company managed five inpatient rehabilitation units through management contracts.

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