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THC — Deck

Tenet Healthcare · THC · NYSE

Tenet runs 50 US acute-care hospitals plus USPI, the country's largest ambulatory surgery network at 533 centers — earning roughly half its operating income from the smaller, higher-margin surgery business.

$183
Share price
$15.9B
Market cap
$21.3B
Revenue (TTM)
99K
Employees
Tenet was a sub-$15 stock in March 2020, ground out a 14-bagger to a $244 peak in March 2026, then gave back 25% in six weeks to $183 today.
2 · The tension

Bull case rests on USPI as a hidden ambulatory platform. Its same-facility case volume just turned negative.

  • USPI sum-of-the-parts. 533 ambulatory surgery centers earning a 34% segment margin. At Surgery Partners take-out comps (~12x EBITDA), USPI alone is worth $14–17B — roughly the entire $15.9B market cap, leaving the 50-hospital chassis as a free option.
  • Deceleration is already printed. FY26 Adj. EBITDA guide is +1.5% versus FY25's +14%; FY26 Adj. FCF less NCI is guided below FY25 actual ($1.6–$1.83B vs $1.84B), the first year-over-year decline since 2022. USPI same-facility case volume printed -2.1% in FY25 — revenue growth is now entirely acuity mix, not units.
  • Tape got the message. $244 in March 2026 to $183 today; Wells Fargo cut PT $265 → $213, Guggenheim $283 → $252, Morgan Stanley $260 → $254 — all on May 1, 2026, after a Q1 revenue miss and flat same-store sales.
A platform that loses units cannot trade on take-out comps drawn from growing platforms.
3 · The variant

Sell-side debates USPI multiples. The buyback compounder mechanically breaks in FY26.

  • Wrong cash unit. The buyback that bulls call "9%/year compounding regardless of rerate" is funded by Adjusted FCF less NCI — guided $1.6–$1.83B versus FY25's $1.84B actual. First year-over-year decline in cash to shareholders since 2022.
  • Q1 conversion is an illusion. Q1 FY26 OCF of $1.64B includes ~$540M of one-time CommonSpirit Omnibus cash; strip it out and organic OCF is closer to $1.10B. The replacement is a $1.36B non-interest-bearing CHI note that runs off through 2028.
  • Wrong segment under debate. Bull and bear argue USPI; the swing from $122 to $244 fair value lives in Hospital. Hospital adjusted-admission revenue printed -1.5% in Q1 as ACA premium-tax-credit expiration bit, and OBBBA Medicaid hits across TX/FL/AZ/MI in 2027 — management has explicitly said it cannot yet quantify it.
If the cash that funds the buyback is going down, the per-share floor goes with it.
4 · Money picture

Genuine seven-year deleverage and margin transformation, now hitting an air pocket.

$4.1B
EBITDA (FY25)
6.4x
EV / EBITDA 16-yr mean 8.3x
$2.5B
Free cash flow 12% margin
2.5x
Net debt / EBITDA from 8x in 2015

Operating margin tripled from 5% in 2017 to 15% in FY25 as Tenet sold 30+ hospitals, let USPI mix shift run, and refinanced into cheaper paper; net debt fell $4B while the company retired 14% of its share count. The rerate is largely done — 6.4x sits in line with the 5-year average, with only the 16-year mean of 8.3x above. From here the next leg has to come from earnings growth, and the FY26 Adj. EBITDA guide of $4.6B implies +1.5% — the slowest in three years.

5 · The shadow

Compliance rap sheet, an SEC matter the market is ignoring, a CEO who just took a 75% raise.

  • SEC enforcement is live. A June 2025 short report alleged $675–$845M of Medicare outlier and DRG-coding fines, after which the SEC refused the related FOIA under Exemption 7(A) — used only when records would interfere with active enforcement. Tenet/NME has paid $2.5B+ in the same coding categories since 1994.
  • CEO comp +75% to $43.1M. 2025 package: $1.5M salary, $9M cash incentive (200% of target), $31.7M stock. Four NEOs received $11M of off-plan cash retention bonuses last May. Chair and CEO are the same person; the 82-year-old Lead Director also chairs his HR Committee.
  • Insiders are leaving. 18 sales / 0 buys in the trailing six months for $26M+. CEO sold $15M in September 2025 with no 10b5-1 plan disclosed. The Principal Accounting Officer zeroed his stake twice in 12 months — including 8,017 shares at $232.70, within four weeks of the all-time high.
Boards do not pay $11M in off-plan retention to a team that thinks the next two years are easier than the prior two.
6 · Bull and Bear

Lean cautious — wait for the binary to resolve. The cost of waiting is small.

  • For. USPI's 533 ASCs at 34% segment margin price out at $14–17B alone — roughly the whole $16B market cap, with hospitals as a free option.
  • For. 14% of shares retired since 2022; $1.17B buyback authorization remaining; multiple of 6.4x EV/EBITDA versus a 16-year mean of 8.3x leaves room.
  • Against. FY26 EBITDA growth guides to +1.5% versus FY25's +14%; USPI same-facility case volume -2.1%; Adj. FCF less NCI guided below FY25 actual.
  • Against. SEC FOIA refusal confirms an active matter; OBBBA Medicaid 2027 cliff still unquantified by management; CEO comp +75% with $26M of insider sales and zero buys.
My view — wait. Two consecutive USPI same-facility case volume prints turning non-negative, OR management putting a number on OBBBA, would flip this to lean long. Until one lands, the cost of waiting is small versus stepping in front of a cycle that has visibly turned.

Watchlist to re-rate: Q2 FY26 print (~July 22) for USPI case volume and organic FCF less NCI ex-CommonSpirit; Senate floor action on the House-passed ACA premium-tax-credit extension; SEC EDGAR for any 8-K Item 3 disclosure citing outlier payments or DRG coding.