Brookdale Senior Living Inc. (NYSE:BKD) Stock Rockets 56% But Many Are Still Ignoring The Company

Brookdale Senior Living Inc. (NYSE:BKD) shareholders have had their patience rewarded with a 56% share price jump in the last month. Unfortunately, the gains of the last month did little to right the losses of the last year with the stock still down 45% over that time.

In spite of the firm bounce in price, given about half the companies operating in the United States' Healthcare industry have price-to-sales ratios (or "P/S") above 1.2x, you may still consider Brookdale Senior Living as an attractive investment with its 0.3x P/S ratio. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

Check out our latest analysis for Brookdale Senior Living

What Does Brookdale Senior Living's Recent Performance Look Like?

Brookdale Senior Living hasn't been tracking well recently as its declining revenue compares poorly to other companies, which have seen some growth in their revenues on average. It seems that many are expecting the poor revenue performance to persist, which has repressed the P/S ratio. So while you could say the stock is cheap, investors will be looking for improvement before they see it as good value.

Want the full picture on analyst estimates for the company? Then our free report on Brookdale Senior Living will help you uncover what's on the horizon.

Do Revenue Forecasts Match The Low P/S Ratio?

The only time you'd be truly comfortable seeing a P/S as low as Brookdale Senior Living's is when the company's growth is on track to lag the industry.

Taking a look back first, we see that there was hardly any revenue growth to speak of for the company over the past year. This isn't what shareholders were looking for as it means they've been left with a 16% decline in revenue over the last three years in total. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Turning to the outlook, the next year should generate growth of 11% as estimated by the three analysts watching the company. With the industry only predicted to deliver 8.2%, the company is positioned for a stronger revenue result.

In light of this, it's peculiar that Brookdale Senior Living's P/S sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Brookdale Senior Living's P/S?

Brookdale Senior Living's stock price has surged recently, but its but its P/S still remains modest. Generally, our preference is to limit the use of the price-to-sales ratio to establishing what the market thinks about the overall health of a company.

A look at Brookdale Senior Living's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. There could be some major risk factors that are placing downward pressure on the P/S ratio. While the possibility of the share price plunging seems unlikely due to the high growth forecasted for the company, the market does appear to have some hesitation.

It is also worth noting that we have found 3 warning signs for Brookdale Senior Living that you need to take into consideration.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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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.