Release is here: http://finance.yahoo.com/news/Skilled-Healthcare-Group-prnews-1535240150.html?x=0&.v=1. It has 21% run today after the better number and outlook.
You probably never heard of this one before. It’s in the healthcare sector, long term care industry. This is one stock I’m having for a long shot. Right now it’s in the low price category (<$5) and it’s really volatile. The reason I picked this one is due to the dramatic sell-off a while ago. I wished I had picked it up right after the sell-off.
The sell-off is due to lawsuit payment: over 600 million which was eventually reduced to ~54 million. What is the lawsuit about? Simply put, SKH didn’t have enough nurses to take care of the patients/residents they accommodate. It’s actually an industry norm as I see since I had some first hand experience with nursing home companies. There are always not enough personnel as facility managers have to watch their labor cost very closely. They will let nurses go home early if resident census goes down. This is happening on a daily basis. Most of the nurses are working on hourly salary and they don’t get paid as well as those in hospitals; then the turnover ratios are scarily high—over 70%. For a nurse to stay in a nursing home facility he/she does have to gain pride in what he/she does. Good management is the key.
It is a challenging industry but also rewarding one. Most of time, Medicare, Medicaid, etc get the patients covered and the money is from Government. As long as the company has experts who know the regulation well and evaluate patients/residents well the revenue is guaranteed. Normally for a well-managed nursing home the cash flow is great. Think about the baby boomers in the States and people do get old and ill. In 20 or 30 years, the demand for nursing home service could explode.
As you read the Skilled Healthcare Group’s report, there are a few points you might want to pay special attention: medicare mix, skilled mix, occupancy rate, and also the revenue per patient day by type. These factors normally tell the health of the company. You know, you want high revenue potential patients so people on medicare is better than Medicaid. You want all the beds be filled so high occupancy rate is desirable. Skilled nursing care brings more revenue than other non-acute services so high skilled mix is good for the company. And so on. These are true for other long-term care firms too. I'll post SKH's earning stats and ratios tomorrow.
No comments:
Post a Comment