HCAT Stock Analysis: Why Health Catalyst Inc Scored 23% in Stock Value Finder

**Health Catalyst Inc (HCAT): A Detailed Educational Stock Research Review**

**Overview of Health Catalyst Inc (HCAT)**

Health Catalyst Inc (HCAT) is a healthcare technology company specializing in **health information services**. The company provides data analytics, software, and consulting solutions designed to help healthcare organizations improve clinical, financial, and operational outcomes. Health Catalyst operates in a growing sector where hospitals, clinics, and insurers increasingly rely on data-driven decision-making to enhance efficiency and patient care.

This article is an **educational StockValueFinder review** of HCAT, based on the latest available metrics. The goal is to help readers understand how to evaluate stocks using fundamental and valuation-based criteria. We will examine key financial health indicators, profitability, debt management, valuation, and trend signals—without making predictions or recommendations.

StockValueFinder assigned HCAT a **score of 23%**, resulting in an **"AVOID"** rating. This score reflects a combination of weak profitability, high debt concerns, and an elevated valuation relative to earnings. Below, we break down each metric to explain why the stock received this assessment.

—

**Why the StockValueFinder Score Matters**

The **StockValueFinder score** is a composite measure that evaluates a stock across multiple financial and valuation tests. Each test is designed to assess a different aspect of a company’s financial health, efficiency, and market valuation. The score ranges from 0% to 100%, with higher scores indicating stronger financial fundamentals and more attractive valuations.

A score of **23%** places HCAT in the **"AVOID"** category. This does not mean the company is failing or that the stock will decline—it simply means that, based on the available data, the stock does not meet the criteria for financial strength, profitability, or valuation discipline that StockValueFinder typically prefers.

Scores are not static; they can change as new financial data is released. Investors should use scores as one tool among many when evaluating stocks.

—

**EPS Strength and Consistency**

**What Is EPS?**

Earnings per share (EPS) measures a company’s profitability on a per-share basis. It is calculated by dividing net income by the number of outstanding shares. Consistent and growing EPS is often a sign of a stable, well-managed business.

**Why EPS Consistency Matters**

StockValueFinder looks for companies with **stable or improving EPS over time**. Frequent losses, erratic earnings, or declining EPS can signal business challenges, competitive pressures, or poor capital allocation.

**What Is Considered Strong or Weak?**

– **Strong EPS:** Consistent positive earnings, ideally growing over time. – **Weak EPS:** Frequent losses, erratic swings, or declining earnings.

**HCAT’s EPS Test Result**

The system recorded that HCAT **did not pass the EPS test**. This means that, based on the available data, the company’s earnings history did not meet the criteria for consistency or profitability.

**Important Note:** The exact EPS values were not supplied in the available data. This test result is based on the system’s assessment of earnings stability, not a specific numerical threshold.

**Educational Example**

Consider two hypothetical companies

– **Company A:** Reports EPS of $1.20, $1.30, and $1.40 over three years (consistent growth). – **Company B:** Reports EPS of $0.50, -$0.20, and $0.10 (erratic, with a loss in year two).

Company A would likely pass an EPS consistency test, while Company B would not. This does not mean Company B is a bad investment—it simply indicates higher earnings volatility.

—

**ROIC and Capital Efficiency**

**What Is ROIC?**

Return on invested capital (ROIC) measures how effectively a company uses its capital to generate profits. It is calculated as:

**ROIC = (Net Operating Profit After Tax) / (Total Invested Capital)**

ROIC helps investors understand whether a company is generating strong returns from its investments in assets, acquisitions, or operations.

**Why ROIC Matters**

A high ROIC suggests that a company is **efficiently deploying capital** to grow its business. A low or negative ROIC may indicate poor capital allocation, weak profitability, or an uncompetitive business model.

**What Is Considered Strong or Weak?**

– **Strong ROIC:** Typically **10% or higher**. Companies with ROIC above 15% are often considered highly efficient. – **Weak ROIC:** Below 5%, or negative. A negative ROIC means the company is losing money on its invested capital.

**HCAT’s ROIC**

Health Catalyst’s ROIC is **-42.68%**. This is **deeply negative**, meaning the company is not generating returns on its invested capital—instead, it is losing money on its investments.

**Why HCAT Failed the ROIC Test**

StockValueFinder generally prefers ROIC of **10% or higher**. HCAT’s ROIC of -42.68% is far below this threshold, indicating poor capital efficiency.

**Educational Example**

– **Company X:** ROIC of 18% (strong capital efficiency). – **Company Y:** ROIC of 3% (weak capital efficiency). – **Company Z:** ROIC of -25% (losing money on invested capital).

Company X would likely pass the ROIC test, while Company Y and Z would not. Again, this does not mean Company Z is doomed—it simply highlights a financial weakness that investors should investigate further.

—

**Interest Coverage and Financial Safety**

**What Is Interest Coverage?**

Interest coverage measures a company’s ability to pay the interest on its debt. It is calculated as:

**Interest Coverage = (Earnings Before Interest and Taxes) / (Interest Expense)**

A higher ratio means the company can more easily cover its interest payments.

**Why Interest Coverage Matters**

If a company struggles to pay interest, it may face liquidity issues, credit downgrades, or even bankruptcy. StockValueFinder prefers companies with **strong interest coverage** to reduce financial risk.

**What Is Considered Strong or Weak?**

– **Strong Interest Coverage:** **6x or higher** (the company earns six times its interest expense). – **Weak Interest Coverage:** Below 2x (the company is at risk of defaulting on interest payments).

**HCAT’s Interest Coverage Test Result**

The system recorded that HCAT **did not pass the interest coverage test**. This means the company’s ability to cover its interest payments is considered weak based on the available data.

**Important Note:** The exact interest coverage ratio was not supplied. The test result is based on the system’s assessment, not a specific numerical value.

**Educational Example**

– **Company M:** Interest coverage of 8x (strong financial safety). – **Company N:** Interest coverage of 1.5x (high risk of default).

Company M would likely pass the interest coverage test, while Company N would not. This does not mean Company N will fail—it simply signals higher financial risk.

—

**Debt Payback and Balance Sheet Discipline**

**What Is Debt Payback?**

Debt payback measures how long it would take a company to pay off its total debt using its current operating income. It is calculated as:

**Debt Payback Years = (Total Debt) / (Operating Income)**

A shorter payback period indicates a stronger balance sheet.

**Why Debt Payback Matters**

Companies with **high debt and long payback periods** are more vulnerable to economic downturns, rising interest rates, or cash flow disruptions. StockValueFinder prefers companies that can pay off debt in **3 years or less**.

**What Is Considered Strong or Weak?**

– **Strong Debt Payback:** **3 years or less**. – **Weak Debt Payback:** **5 years or more**, or negative (indicating operating losses).

**HCAT’s Debt Payback**

Health Catalyst’s debt payback is **-639.76 years**. This **negative value** means the company is **not generating positive operating income**—it is losing money at the operating level.

**Why HCAT Passed the Debt Payback Test (But Still Has Major Concerns)**

StockValueFinder’s debt payback test is designed to flag companies with **excessively long payback periods**. Since HCAT’s debt payback is negative, the system **passed the test by default**—not because the company has a strong balance sheet, but because the test is not applicable in cases of negative operating income.

However, this does **not** mean HCAT’s debt situation is healthy. A negative debt payback is a **red flag**, indicating that the company is not generating enough income to cover its debt obligations.

**Educational Example**

– **Company P:** Debt payback of 1.5 years (strong balance sheet). – **Company Q:** Debt payback of 7 years (high debt risk). – **Company R:** Debt payback of -100 years (operating losses, unable to pay debt).

Company P would pass the debt payback test, while Company Q and R would not. Company R’s negative payback is particularly concerning, as it suggests fundamental profitability issues.

—

**P/E Ratio and Valuation Discipline**

**What Is the P/E Ratio?**

The price-to-earnings (P/E) ratio measures how much investors are paying for each dollar of a company’s earnings. It is calculated as:

**P/E Ratio = (Stock Price) / (Earnings Per Share)**

A lower P/E ratio may indicate a **cheaper valuation**, while a higher P/E ratio may suggest **growth expectations** or **overvaluation**.

**Why P/E Ratio Matters**

StockValueFinder uses the P/E ratio to assess whether a stock is **reasonably priced relative to its earnings**. The system generally prefers P/E ratios of **15 or lower** for valuation discipline.

**What Is Considered Strong or Weak?**

– **Strong (Attractive) P/E:** **15 or lower** (value-oriented). – **Weak (Expensive) P/E:** **25 or higher** (growth-oriented or overvalued).

**HCAT’s P/E Ratio**

Health Catalyst’s P/E ratio is **24.86**. This is **above the preferred threshold of 15**, meaning the stock is trading at a **higher multiple of its earnings** than StockValueFinder typically considers attractive.

**Why HCAT Failed the P/E Valuation Test**

A P/E of 24.86 suggests that investors are paying **nearly 25 times** the company’s earnings. While this is not necessarily "expensive" for a high-growth company, HCAT’s **negative ROIC and weak profitability** make this valuation harder to justify.

**Educational Example**

– **Company S:** P/E of 10 (cheap valuation, assuming earnings are stable). – **Company T:** P/E of 30 (expensive, often seen in high-growth stocks). – **Company U:** P/E of 25 with negative ROIC (high valuation for a struggling business).

Company S would likely pass the P/E test, while Company T and U would not. Company U’s high P/E is particularly risky because it is not backed by strong profitability.

—

**Moving Average Trend and Entry Timing**

**What Is a Moving Average?**

A moving average smooths out price fluctuations to identify trends. StockValueFinder uses moving averages to assess whether a stock is in an **uptrend, downtrend, or weak trend**.

**Why Trend Matters**

While fundamental analysis focuses on financial health, **trend analysis** helps investors assess **timing discipline**. A weak trend does not mean a stock will decline—it simply means the current price action lacks clear directional strength.

**HCAT’s Moving Average Signal**

Health Catalyst’s moving average signal is **"WEAK TREND"**. This means the stock is not showing a strong upward or downward trend based on recent price movements.

**Entry Signal and Risk Levels**

– **Entry Signal:** N/A (no clear buy signal). – **Limit Buy Idea:** N/A (no suggested entry price). – **Pullback Zone:** N/A (no defined support level). – **Risk Stop / Trend Risk Level:** N/A (no defined stop-loss level).

**Educational Example**

– **Stock A:** Moving average signal = "STRONG UPTREND" (clear upward momentum). – **Stock B:** Moving average signal = "WEAK TREND" (indecisive price action). – **Stock C:** Moving average signal = "STRONG DOWNTREND" (clear downward momentum).

Stock A might be considered for a trend-following strategy, while Stock B would require further analysis. Stock C would likely be avoided by trend-focused investors.

—

**Overall Financial Strengths and Weaknesses**

**Strengths**

1. **Debt Payback Test Passed (Technically):** While HCAT’s debt payback is negative, the system passed this test by default. This does **not** indicate strength—it simply means the test was not applicable due to negative operating income. 2. **Growing Industry:** Health Catalyst operates in **health information services**, a sector with long-term growth potential as healthcare organizations increasingly adopt data-driven solutions.

**Weaknesses**

1. **Negative ROIC (-42.68%):** The company is losing money on its invested capital, indicating poor capital efficiency. 2. **Failed EPS Test:** The company’s earnings history did not meet consistency criteria. 3. **Failed Interest Coverage Test:** The company’s ability to cover interest payments is weak. 4. **High P/E Ratio (24.86):** The stock is trading at a premium relative to earnings, despite weak profitability. 5. **Weak Trend Signal:** The stock lacks clear directional momentum.

—

**Risks and Limitations**

1. **Profitability Concerns:** HCAT’s negative ROIC and failed EPS test suggest the company is struggling to generate consistent profits. 2. **High Debt Risk:** While the debt payback test was passed by default, the **negative operating income** means the company cannot currently service its debt from earnings. 3. **Valuation Risk:** A P/E of 24.86 is high for a company with weak profitability, meaning investors are paying a premium for uncertain growth. 4. **Industry Competition:** The health information services sector is competitive, with established players like Epic Systems, Cerner, and newer entrants vying for market share. 5. **Macroeconomic Risks:** Rising interest rates or budget cuts in healthcare spending could pressure HCAT’s revenue and profitability.

—

**Educational Conclusion**

Health Catalyst Inc (HCAT) presents a **mixed financial profile** with **significant weaknesses** in profitability, capital efficiency, and valuation. The StockValueFinder score of **23%** and **"AVOID"** rating reflect these concerns.

**Key Takeaways for Investors**

1. **Profitability Matters:** HCAT’s **negative ROIC (-42.68%)** and failed EPS test indicate the company is not efficiently generating profits. 2. **Debt Can Be a Red Flag:** Even though the debt payback test was passed by default, the **negative operating income** means HCAT cannot currently service its debt from earnings. 3. **Valuation Should Match Fundamentals:** A P/E of **24.86** is high for a company with weak profitability, meaning investors are paying a premium for uncertain growth. 4. **Trend Alone Is Not Enough:** The **"WEAK TREND"** signal suggests the stock lacks clear directional momentum, which may not be ideal for trend-following strategies. 5. **Scores Are Tools, Not Predictions:** A low score does not guarantee failure—it simply means the stock does not meet the criteria for financial strength and valuation discipline.

**How to Apply This Analysis to Other Stocks**

– **Check ROIC:** Look for companies with **ROIC above 10%** for strong capital efficiency. – **Assess EPS Consistency:** Avoid companies with **frequent losses or erratic earnings** unless you understand the reasons behind the volatility. – **Evaluate Debt Payback:** Prefer companies that can pay off debt in **3 years or less**. – **Compare P/E to Profitability:** A high P/E is only justified if the company has **strong growth and profitability**. – **Use Trend as a Timing Tool:** A weak trend does not mean a stock is bad—it simply means the current price action lacks clarity.

This article is for **research and educational purposes only**. It is not personal financial advice, investment advice, or a recommendation to buy or sell any security. Always conduct your own due diligence before making investment decisions.

---

Research links: Yahoo Finance | Seeking Alpha | Finviz | SEC Filings