With a rapidly aging population, increasing chronic illnesses, and the emergence and re-emergence of viral diseases, the need for quality medical care facilities is likely to rise. According to the Centers for Medicare and Medicaid Services, national healthcare spending in the United States is expected to exceed $6.2 trillion by 2028.
However, despite a rapidly aging population, the legacy assisted living facilities are experiencing a slowdown due to severe competition. According to many analysts, the consequences of the pandemic are still being felt in facility-based care, with operators exhibiting a second consecutive decreasing trend in rates in some locations.
Furthermore, as workforce shortages continue to wreak havoc on businesses across the country, the assisted living industry took a significant hit. According to the latest research from the National Investment Center for Seniors Housing & Care, assisted living communities, continuing care retirement homes, and skilled nursing institutions are facing slower workforce recoveries than other healthcare sectors.
This has led to major facility-based care providers Brookdale Senior Living Inc. (BKD) and Signify Health Inc. (SGFY) witnessing significant operational deficiencies. In addition, these stocks have slumped significantly in price over the past few months. Therefore, we think these stocks are best avoided now.
Brookdale Senior Living Inc. (BKD)
BKD operates retirement facilities that provide independent living, assisted living, memory care, and continuing care. As of March 31, 2022, it operated and managed 677 communities in 41 states, with the capacity to service more than 60,000 inhabitants.
BKD's total revenue and other operating income decreased 9.6% year-over-year to $677.82 million in the first quarter ended March 31, 2022. Its loss from operations came in at $53.53 million. The company reported a net loss of $100.03 million, while its loss per share amounted to $0.54 over this period.
The company's EPS is expected to decline 129.2% next quarter and 153.7% in fiscal 2022. The stock has declined 50.2% over the past three months and 9.6% over the past month.
BKD's POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of D, which translates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BKD has been graded an F for Sentiment and a D for Momentum and Quality. Within the D-rated Medical – Services industry, it is ranked #57 of 84 stocks.
To see additional POWR Ratings for Growth, Value, and Stability for BKD, click here.
Signify Health Inc. (SGFY)
SGFY is a premier healthcare platform that creates and powers value-based payment schemes by leveraging advanced analytics, technology, and nationwide healthcare provider networks. The company operates in two segments: Home & Community Services and Episodes of Care Services.
For the first quarter ended March 31, 2022, SGFY's revenue increased 20.3% year-over-year to $216.5 million. However, the company reported a net loss of $10.9 million. Its cash and cash equivalents came in at $451.3 million, representing a year-over-year decline of 33.5%. In addition, its net cash used in operating activities amounted to $32.3 million, compared to net cash provided by operating activities of $86.7 million in the prior-year quarter.
SGFY's EPS is estimated to decline 25% next quarter. The stock has declined 53.3% over the past year and 37.8% over the past three months.
SGFY's weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our POWR Ratings system. The stock has a D grade for Sentiment and Quality. In the Medical – Services industry, it is ranked #59.
In addition to the POWR Ratings grades I have just highlighted, you can see the SGFY rating for Stability, Momentum, Growth, and Value here.
BKD shares were unchanged in premarket trading Monday. Year-to-date, BKD has declined -7.17%, versus a -17.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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