Investment Thesis
Universal Health Realty shows strong operational margins (36.5%) and positive FCF generation, but faces material concerns from declining net income despite 626% YoY revenue growth, indicating questionable earnings quality. High leverage (2.54x D/E) with minimal cash reserves ($7.1M) and very weak returns (3.4% ROE, 0.9% ROA) create financial stress despite adequate interest coverage.
Strengths
- Strong operating margin of 36.5% demonstrates pricing power and cost control
- Positive free cash flow generation of $4.3M with 17.7% FCF margin provides cash for debt service
- Interest coverage of 4.1x suggests current debt levels are serviceable at operating income levels
Risks
- Net income declined 8.4% YoY despite anomalous 626% revenue growth, indicating severe earnings quality concerns and potential one-time events masking underlying trends
- Excessive leverage (2.54x D/E) with only $7.1M cash against $374.8M long-term debt creates refinancing and liquidity risk
- Critically low returns on equity (3.4%) and assets (0.9%) indicate capital is not generating adequate returns relative to risk exposure
Key Metrics to Watch
- Revenue sustainability and organic growth rate excluding one-time items driving 626% increase
- Net income trend reversal and quality of earnings reconciliation
- Cash position and debt refinancing schedule relative to maturity profile
Financial Metrics
Revenue
24.5M
Net Income
5.0M
EPS (Diluted)
$0.36
Free Cash Flow
4.3M
Total Assets
563.8M
Cash
7.1M
Profitability Ratios
Gross Margin
N/A
Operating Margin
36.5%
Net Margin
20.5%
ROE
3.4%
ROA
0.9%
FCF Margin
17.7%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
2.54x
Debt/Assets
73.8%
Interest Coverage
4.12x
Long-term Debt
374.8M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T06:55:42.783752 |
Data as of: 2026-03-31 |
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