Community Health Systems Shares Plunged: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shareholders of Community Health Systems (NYS: CYH) may need a place to lie down following the company's 10% drop today.
So what: Community Health Systems, a provider of general and specialized hospital health-care services, is another potential victim of the likely passage of the debt-reduction package in Congress. The bill, which calls for some $2 trillion-plus in spending cuts over the next decade, has the potential to take a big bite out of health care companies -- specifically those who receive a good amount of their funding through Medicare. While there are still many unanswered questions, it appears investors would rather take this company to the chopping block now rather than later.
Now what: What a difference a weekend makes! On Friday, shareholders were driving up the company's share price on considerably better-than-expected earnings, and today they can't find the exit fast enough. Fundamentally, Community Health is fairly inexpensive at only 6.7 times forward earnings, and it's now trading below its book value of $25.20. It'd be foolish (with a little "f") to assume we know the full implications of the debt-reduction bill as of now, but I feel investors may have cast this company aside perhaps a bit too soon.
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