Community Health Systems (CYH), mcap=$319, price $2.37 vs $2.67

$CYH pitch:
– The highly levered operator of hospitals is potentially on the verge of bankruptcy due to spiraling wage inflation.
– If bankruptcy / highly dilutive capital raise is avoided in the next couple of years stock is expected to rebound to the $10+ range, i.e. 275% upside.
– Recent results and trends indicate that turnaround is moving in the right direction and default on debt could be avoided.
– The company still has $1.2bn in liquidity from cash + untapped ABL.
– High leverage, $350m mcap vs $12.5bn net debt, 7.1x net debt to EBITDA.

$CYH valuation:
– Consensus 2023 EPS estimates in the $1.30-1.40 range.
– Trades at 8.3x 2023 EBITDA, and 17x 2023 EPS.
– If the turnaround is successful, equity would rebound to the $10+ range, where it traded at the beginning of 2022.

Exp. gain: +275% to $10/share

Full CYH write-up (free guest account required):

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