Tenet On Road to Recovery

Skolnick has a buy recommendation and a two-year price target of $8.70 on Tenet's shares. Her firm makes a market in the company's securities.

Vital Signs Still Weak

To be clear, Tenet still looks like one sick company.

By now, critics have offered a long list of problems threatening the company's survival. First and foremost, Tenet carries a huge debt burden -- approaching $4.8 billion -- and generates no positive cash flow. The company's debt-to-capital ratio, hovering in the low 70% range just a few years ago, now stands at an astounding 98%.

Tenet needs to boost admissions and lower costs to regain its financial health. Yet even after investing billions of dollars in capital improvements that were intended to attract well-insured patients to its hospitals, the company has seen its volumes steadily erode over the past couple of years. Only uninsured admissions -- which lead to huge bad-debt charges -- have significantly expanded during that timeframe.

Florida, once a prized hospital market, has caused exceptional pain. Weak volumes there, caused by fierce competition for a dwindling number of patients who carry insurance, have wiped out gains mustered elsewhere in the system.

Tenet has nonetheless clung to Florida as a core holding in its 64-hospital chain. Now, the company must repair that market -- which ranks as its second largest -- to turn around its operations as a whole.