Ardent Health (ARDT) Plunges 4.06% Amid Medicaid Cuts

Ardent Health (ARDT) shares plummeted to a record low today, with an intraday decline of 4.06%.

The strategy of buying ARDT shares after they reach a recent low and selling them a week later delivered moderate returns but underperformed the benchmark. The strategy’s CAGR was 7.78%, trailing the benchmark by 1.49 percentage points. With a maximum drawdown of 0% and a Sharpe ratio of 0.17, the strategy indicated a risk-averse approach but lacked sharp performance relative to the market.

Ardent Health has been grappling with significant legislative risks stemming from cuts in Medicaid and Medicare. These reductions have introduced considerable uncertainty, leading to a recent downgrade by BofA Securities. The investment bank anticipates increasing challenges from cuts to Medicaid and ACA exchanges, which are expected to negatively impact the stock.

Additionally, concerns have been raised about Ardent Health's high level of debt. The company's free cash flow has been reported at only 4.9% of its EBIT over the last three years, indicating a low cash conversion rate. This financial strain has further exacerbated investor worries, contributing to the stock's downward trajectory.