One of the major real estate investment trusts invested in health care facilities, Ventas, Inc. (NYSE:VTR), has risen only 1.13% in 2013, compared to the 12.93% return offered by the Dow Jones Industrial Average.
Ventas is a real estate investment trust invested in health care facilities, including senior housing, specialty care facilities, hospitals, and medical office buildings in 46 states and 2 Canadian provinces. As of the end of 2011, the company possessed nearly 1,400 assets in North America. Based on market capitalization, the company is valued at $19.19 billion. Fundamentally, the company’s business model appears strong, with a TTM profit margin of 14.77%.
With the company having deteriorated over 20% from its 2013 highs, is this an opportune moment to snap up a high-quality company, or should investors remain healthy by staying clear of this particular name?
Strengths:
- Rapid Paced Revenue Growth: In 2003, Ventas reported revenue of $205 million; in 2012, the company announced revenue of $2.48 billion, representing year over year annual growth of 32.28%, a trend that is anticipated to considerably slow into the future with projections placing 2015 revenue at $2.80 billion. This growth has been a result of aggressive investment by the company in new properties
Weaknesses:
–High Valuation: At the moment, Ventas, Inc. (NYSE:VTR) possesses a price to earnings ratio of 50.74, a price to book ratio of 2.24, and a price to sales ratio of 8.31; all of which indicate a company trading with a high valuation
–Net Debt: The company’s $67.91 million in cash and cash equivalents is outweighed by its $8.41 billion in debt, resulting in a net debt of $8.34 billion, accounting for 40.75% of overall market capitalization, a major financial weakness of the company
Opportunities:
- Dividend Growth: Since implementing their dividend program in 1999, Ventas has consistently raised their dividend payouts and is widely anticipated to sustain this trend into the future
- Growing Senior US Population: The US population is rapidly growing old, with the number of people over the age of 85 expected to triple the national average in population growth by 2035, and with this aging US population comes the opportunity for Ventas’ senior housing communities segment to prosper and expand to meet rising demand
