Can Community Health Systems Inc. (NYSE:CYH) abort your expectations?

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Community Health Systems (NYSE:CYH) traded in a range yesterday that spanned from a low of $9.05 to a high of $10.48. Yesterday, the shares gained 20.5%, which took the trading range above the 3-day high of $8.85 on volume of 9.4 million shares. Often times after large one-day gains, short term traders will seek to take profits and, as such, investors should be cautious.

We are going to take a close look at Community Health Systems Inc. (NYSE:CYH) today to get a better sense of the company and its current status, as well as the opportunity it may offer for prospective investors. Today’s focus will be a fundamental evaluation of the stock from top to bottom.

As such, let’s start with the top line: Revenue trends.

Last quarter, the company saw its overall sales move to $4.47B in total revenues. That represents an overall change in revenues, on a quarterly year/year basis, of -0.07%. If we translate that into sequential terms, the company saw sales grow by 0.02% from quarter to quarter.

Sales data gives you a great sense of whether or not a go-to-market strategy is hitting the right note. But operational execution on every level is how great companies manifest their greatness. And that only really shows up on the bottom line. As such, let?s take a look at that set of data.

Community Health Systems Inc. (NYSE:CYH) is intriguing when broken down to its core data. The cost of selling goods last quarter was $4.18B, yielding a gross basic income of $289M. For shareholders, given the total diluted outstanding shares of 111M, this means an overall earnings per share of $(1.98). Note, this compares with a consensus analyst forecast of $0.14 in earnings per share for its next fiscal quarterly report.

With that in mind, what are folks on Wall Street expecting out of the company? Let’s take a quick look before we dig into the balance sheet and the company?s cash situation.

At present, analysts hold a consensus average recommendation of Hold. This is based on a total of 21. While we don’t suggest taking analyst recommendations as face value plans for action in a portfolio, we do think it is important to note where consensus is on a stock to understand what basic assumptions are perhaps already discounted into market pricing of shares of the stock.

As far as price targets, analysts currently have an average target on shares of at $8.81. In addition, if we turn to next year, we see estimates of a fiscal year forecast to bring about $1.05 in total earnings per share. On a median price to earnings ratio basis, that outlook adds up to a valuation of 8.36 times earnings.

At the end of the day, things aren?t always rosy. And it?s important to know whether or not a company has the intestinal fortitude to weather a storm. And that?s a question of balance sheet health and cash flows from operations.

As the reader is no doubt aware, for any company, balance sheet health sits at the heart of the company’s capacity to stand up to the demands and obligations incurred by normal and contingent operations, which in turn lies at the core of a company’s ability to retain the faith of investors in the marketplace. For Community Health Systems Inc. (NYSE:CYH), the company presently holds about $238M in cash in the coffers. That cash is balanced against about $455M in total current liabilities.

It’s important to consider both a static and dynamic picture, particularly where debt levels are concerned. This means, we need to take into account any trends. In this case, the company’s debt has been $growing. The company also has $21.94B in total assets, balanced by $19.66B in total liabilities, which suggests where this story might go under adverse economic or financial conditions.

The Barchart Technical Opinion rating is a 80% Buy with a Strongest short term outlook on maintaining the current direction. Longer term, the trend strength is Maximum. Long term indicators fully support a continuation of the trend.

As far as cash flows, the company saw a free cash flow last quarter of $143M, representing a quarterly net change in cash of $105M. On a net operating level, the company saw about $327M in cash flow.

We will update the interesting story of Community Health Systems Inc. (NYSE:CYH) as new events transpire.

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