Well, folks, it looks like we've stumbled upon a diamond in the rough in the healthcare sector. Universal Health Services (UHS) has caught my eye, and let me tell you, it's not just because I've spent more time in hospitals lately than I care to admit. (Note to self: skydiving and arthritis don't mix.)

Now, I've been around a while, and I've learned to spot a good deal when I see one. UHS is trading at a valuation that's making my wallet itch. We're talking about a forward P/E of just 13x based on analysts' 2025 EPS estimates of $17.85.

To put that in perspective, it's like finding a Rolex at a yard sale - the Medical Care Facilities industry is strutting around with a 17x forward P/E.

And here's where it gets really interesting. UHS is sporting a PEG ratio of 0.62. For those of you who dozed off during Finance 101, that's like getting a growth stock at a value price. The industry average is sitting pretty at 1.56, making UHS look like an absolute steal.

Now, let's talk about what UHS actually does. They're in the business of owning and operating acute care hospitals, outpatient facilities, and behavioral healthcare centers.

As of Q2 2024, they've got 359 inpatient facilities and 48 outpatient joints spread across 39 states, D.C., Puerto Rico, and even jolly old England.

The company operates under two main segments: Acute Care Hospital Services, which brings in about 87% of the bacon, and Behavioral Health Services, accounting for the remaining 13%.

Inpatient revenue from both segments makes up roughly 64% of total revenue, with outpatient services filling in the rest.

Now, here's where things get even more interesting. The global hospital services market is expected to expand quickly – we're talking about a 6.4% annual growth rate, potentially hitting $21 billion by 2032.

But UHS isn't just sitting pretty waiting for the market to grow. Oh no, they're expanding faster than a tech startup with too much venture capital.

They've got plans for 12 new freestanding emergency departments, a 150-bed acute care hospital under construction in Vegas (because what happens in Vegas... might need medical attention), a 136-bed hospital in D.C. set to open in spring 2025, and a 150-bed facility in Palm Beach Gardens, Florida, ready to roll in spring 2026.

And let's not forget about their Behavioral Health segment. They recently opened a 128-bed behavioral hospital in California and are cooking up a 96-bed joint venture in West Michigan.

Now, I've seen my fair share of companies promise the moon and deliver a mere pebble, but UHS seems to be putting their money where their mouth is.

Just in Q2 2024, they saw their gross margin jump from 39% to 42.6% year-over-year. Operating income margin? Up from 7.9% to 11.2%. Net income margin? A healthy increase from 4.8% to 7.4%.

And they're not just calling it a lucky quarter - they're expecting to keep this party going for the next few periods.

With all this good news, UHS has bumped up their 2024 EPS guidance by a whopping 17% to $15.80 per diluted share.

On top of all these, they've also increased their stock repurchase program by $1 billion, bringing the total authorization to $1.228 billion.

For those of you who slept through that part of business school too, that's like making your slice of the pie bigger without having to bake a new one.

Now, I'm not saying UHS is without risks. They've got a high concentration of revenue in California, Nevada, and Texas. It's like they're betting big on blackjack, roulette, and Texas Hold'em all at once. Any major changes in these states' regulations, economy, or even weather patterns could hit UHS hard.

They're also heavily reliant on Medicare and Medicaid reimbursements. So if Uncle Sam decides to tighten the purse strings, UHS could feel the pinch.

Plus, they're required to treat emergency patients regardless of their ability to pay. A sudden influx of non-paying customers could put a dent in their profits faster than you can say "insurance claim denied."

But overall, the prognosis for UHS looks good. With their margin increases, strong earnings growth, positive stock momentum, and that juicy low valuation, they're poised to be the frontrunners of the global hospital services market.

In my decades of watching the markets, I've learned that sometimes the best opportunities come wrapped in hospital gowns rather than pinstripe suits. UHS might just be one of those opportunities.

I suggest you add it to your watchlist. And if the market hiccups and gives us a dip? Well, that might just be the perfect time to scoop some up for your portfolio.

Ever stumble upon a treasure chest you almost walked past? That's how I feel about Eli Lilly (LLY) these days. When I last weighed in on LLY earlier this year, I was hesitant, pretty much like a seasoned sailor eyeing stormy seas.

The stock's valuations at the time were sky-high, especially when stacked against its arch-rival Novo Nordisk A/S (NVO). But the market, ever the trickster, loves to flip the script when you least expect it.

Since May, LLY has soared by an impressive 24.5%, leaving most of its pharmaceutical peers scrambling in its wake. Only Viking Therapeutics (VKTX) has managed to keep pace in this high-stakes race.

So, what's ignited this rocket?

For starters, Eli Lilly finally ironed out the kinks in its supply chain. By early August 2024, the shortages plaguing their weight-loss blockbuster, Mounjaro, were a thing of the past.

Those bottlenecks had put a damper on Mounjaro's performance in the first half of 2024, but now the gates have swung wide open.

But that's not all. LLY's got some serious production muscle coming online from the first half of 2025. This isn't just adding fuel to the fire — it's like pouring jet fuel on a bonfire.

That means we could see Mounjaro and Zepbound sales shooting for the moon in late 2024.

Now, here's the masterstroke. In January 2024, Eli Lilly launched LillyDirect, a direct-to-consumer platform that's nothing short of ingenious.

By slashing prices for self-pay patients on Zepbound, they're not just expanding their market reach—they're throwing a wrench into the burgeoning market for compounded GLP-1 drugs.

Let's crunch some numbers for more context.

A four-week supply of 2.5 mg Zepbound via LillyDirect costs $399 out of pocket. That's in the same ballpark as the $199 monthly fee charged by telehealth platforms like Hims & Hers Health (HIMS) for compounded GLP-1 injectables.

Contrast that with the eye-watering $1,790 monthly price tag for Novo Nordisk's Ozempic or the $1,990 for Wegovy, and it's clear why Lilly's strategy is turning heads and opening wallets.

All this momentum has Lilly's management grinning like the cat that ate the canary. They've bumped up their 2024 revenue guidance to a staggering $46 billion — a 34.8% year-over-year leap.

As for earnings, they're forecasting an adjusted EPS of $16.35, a jaw-dropping 158.7% increase from last year. Even a market veteran like me has to tip his hat.

Wall Street analysts are also joining the party, projecting Lilly's top and bottom lines to grow at a compound annual growth rate of 26.1% and 66.7%, respectively, through 2026.

Now, you might be scratching your head and thinking, "Isn't LLY overvalued at this point?"

Surprisingly, despite a forward P/E ratio of 55.39x — well above its historical averages — Lilly's forward PEG ratio sits at a comfortable 1.30x. That's lower than its 5-year mean of 2.19x and even the sector median of 2.00x.

In plain English, there's still some juice left in this orange for value investors.

But let's not get ahead of ourselves. Viking Therapeutics is hot on Lilly's heels with its VK2735 candidate, boasting impressive Phase 3 trial results.

Imagine 14.7% weight loss from baseline in just 13 weeks with their injectable version — that's actually warp speed compared to Lilly's current offerings.

And it's not just Viking sharpening their knives. The GLP-1 arena is set to become a battlefield, with up to 16 new drugs potentially launching by 2029.

So, where does that leave us? I'm cautiously upgrading Eli Lilly to a Buy, but I'm keeping my eyes wide open.

The market is frothy, perhaps a bit too exuberant for my taste. You might want to hold your horses and wait for a pullback into the $780–$845 range before jumping in.

Keep an eye on Lilly's balance sheet, too. Expansion at this scale doesn’t come cheap.

The company’s net debt has swelled to $25.53 billion, a hefty 59.6% increase from last year. Annualized interest expenses are creeping up as well, now at $734.4 million.

It’s not a five-alarm fire, but it’s smoke worth watching.

Eli Lilly has made bold moves in the GLP-1 market, positioning itself as a leader while others scramble to catch up. The question is, are you ready to take a seat at the table?

After all, in the words of the great Kenny Rogers, "You've got to know when to hold 'em, know when to fold 'em." And right now, LLY's hand is looking pretty strong.