Moody’s is overstating the credit risk of Universal Health Services, Inc. (NYSE:UHS) with its Ba1 rating. Our fundamental analysis highlights a much safer credit profile for UHS, whose strong cash flows would exceed operating obligations each year. Moreover, their healthy liquidity profile would allow them to service all obligations including debt maturities going forward without having to access credit markets. We therefore rate UHS three notches higher at an IG4+ credit rating, or a Baa1 equivalent using Moody’s ratings scale.
Meanwhile, cash bond markets are materially overstating credit risk with a cash bond YTW of 4.446% relative to an Intrinsic YTW of 2.446%, while CDS markets are accurately stating credit risk with a CDS of 85bps relative to an Intrinsic CDS of 107bps.
Click here to read the article in its entirety at Seeking Alpha.