- By GF Value
The stock of Brookdale Senior Living (NYSE:BKD, 30-year Financials) is believed to be modestly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $6.19 per share and the market cap of $1.1 billion, Brookdale Senior Living stock is estimated to be modestly overvalued. GF Value for Brookdale Senior Living is shown in the chart below.
Because Brookdale Senior Living is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth.
Link: These companies may deliever higher future returns at reduced risk.
Investing in companies with poor financial strength has a higher risk of permanent loss of capital. Thus, it is important to carefully review the financial strength of a company before deciding whether to buy its stock. Looking at the cash-to-debt ratio and interest coverage is a great starting point for understanding the financial strength of a company. Brookdale Senior Living has a cash-to-debt ratio of 0.10, which is worse than 86% of the companies in the industry of Healthcare Providers & Services. GuruFocus ranks the overall financial strength of Brookdale Senior Living at 3 out of 10, which indicates that the financial strength of Brookdale Senior Living is poor. This is the debt and cash of Brookdale Senior Living over the past years:
It is less risky to invest in profitable companies, especially those with consistent profitability over long term. A company with high profit margins is usually a safer investment than those with low profit margins. Brookdale Senior Living has been profitable 1 over the past 10 years. Over the past twelve months, the company had a revenue of $3.4 billion and earnings of $0.43 a share. Its operating margin is 0.21%, which ranks in the middle range of the companies in the industry of Healthcare Providers & Services. Overall, the profitability of Brookdale Senior Living is ranked 3 out of 10, which indicates poor profitability. This is the revenue and net income of Brookdale Senior Living over the past years: