NEW YORK (TheStreet) -- Shares of Tenet Healthcare (THC) - Get Report were gaining 11.8% to $56 on heavy trading volume after the Supreme Court ruled the federal government can continue issuing subsidies to Americans through the Affordable Care Act, also known as Obamacare.
In a 6-3 decision, the Court ruled that the U.S. government can provide subsidies to Americans living in states that did not set up their own health insurance exchanges through the ACA. "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them," Chief Justice Roberts wrote for the court.
About 6.5 million American could have lost their credits for healthcare if the Supreme Court ruled against the ACA, according to the Wall Street Journal.
Shares of hospitals such as Tenet Healthcare gained following the ruling as the ACA helps patients pay for their care.
About 4.3 million shares of Tenet Healthcare were traded by 10:46 a.m. Thursday, above the company's average trading volume of about 1.5 million shares a day.
TheStreet Ratings team rates TENET HEALTHCARE CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TENET HEALTHCARE CORP (THC) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TENET HEALTHCARE CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, TENET HEALTHCARE CORP turned its bottom line around by earning $0.32 versus -$1.20 in the prior year. This year, the market expects an improvement in earnings ($2.23 versus $0.32).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Health Care Providers & Services industry. The net income increased by 246.9% when compared to the same quarter one year prior, rising from -$32.00 million to $47.00 million.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- Net operating cash flow has significantly decreased to -$57.00 million or 200.00% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 14.70 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, THC maintains a poor quick ratio of 0.71, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: THC Ratings Report