Brookdale Senior Living (BKD): Examining Valuation After Q3 Earnings Miss and Upbeat Outlook

Brookdale Senior Living saw its shares in focus following the release of third quarter earnings. Even though results fell short of expectations, the company delivered record occupancy, higher adjusted EBITDA, and updated its outlook for the rest of the year.

See our latest analysis for Brookdale Senior Living.

Despite posting a wider quarterly loss and missing revenue estimates, Brookdale Senior Living’s share price momentum has been undeniable lately. The stock has gained 9.8% over the past month and has risen 86% so far this year. The market seems to be warming to the company’s operational initiatives and outlook, and the one-year total shareholder return of 71% shows that longer-term investors are being rewarded as well.

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With shares climbing rapidly despite mixed financials, the key question for investors is clear. Is Brookdale’s turnaround just getting started, or is all that optimism already reflected in the current share price?

Most Popular Narrative: 7% Overvalued

Brookdale Senior Living's most influential narrative assigns a fair value of $8.81, which is about 7% below the last close at $9.43. With the share price running ahead of the consensus view, investors may need conviction in the underlying story to see more upside.

Brookdale is benefiting from accelerating occupancy gains as a result of operational initiatives. With a large and growing share of communities above the 80% occupancy threshold, rising occupancy will increasingly fall to the bottom line due to fixed-cost leverage. This could drive meaningfully higher margins, EBITDA, and free cash flow over the next several years.

Read the complete narrative.

Curious why the valuation seems aggressive despite recent operating momentum? Discover the hidden growth expectations about profit margins and scale that anchor this fair value before deciding if the optimism is justified.

Result: Fair Value of $8.81 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained labor cost pressures or disappointing results from property sales could quickly undermine Brookdale’s margin outlook and recent share price gains.

Find out about the key risks to this Brookdale Senior Living narrative.

Another View: Discounted Cash Flow Tells a Different Story

While the market appears cautious based on analyst price targets and multiples, our SWS DCF model suggests something quite different for Brookdale Senior Living. According to this approach, the shares are actually undervalued by a wide margin, trading 56% below our fair value estimate. Could the market be missing Brookdale’s long-term recovery potential, or is there more risk than the model accounts for?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Brookdale Senior Living Narrative

If you have your own perspective or prefer diving into the numbers firsthand, you can build a personal narrative for Brookdale Senior Living in just a few minutes. Do it your way

A great starting point for your Brookdale Senior Living research is our analysis highlighting 1 key reward and 4 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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