Jefferies Starts Tenet Healthcare (THC) at Buy, Margin Growth Should Drive Up Stocks Price

Jefferies initiates coverage on shares of Tenet Healthcare (NYSE: THC) with a Buy rating and $9.50 price target.

The firm believes that THC offers investors an attractive valuation with low leverage and above-industry earnings growth.

Even with the stock rising to $6.50 following the buyout offer from Community Health Systems (NYSE: CYH) for $6 per share, Jefferies sees the stocks price increasing as the company takes advantage of its significant opportunity to expand its margin.

THC has cut costs and has driven its EBITDA margin to over 12% in 2011, but the firm comments that looking ahead, lower bad debt and higher volumes could push this margin to 18%-19% margin by 2015.

Jefferies 2011 and 2012 EPS estimates are $0.39 and $0.51 while its revenue estimates are $9,748.8 million and $10,227.4 million.

For more ratings news on Tenet Healthcare click here and for the rating history of Tenet Healthcare click here.

Shares of Tenet Healthcare closed at $6.54 yesterday.

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