Orange County’s nursing home companies have parted ways on Wall Street.
Since August, Irvine-based Sun Healthcare Group Inc. and Lake Forest’s Skilled Healthcare Group Inc. have seen their shares drop more than 40%. Sun had a recent market value of about $400 million. Skilled was worth about $300 million.
The third nursing home operator based here,Ensign Group Inc. of Mission Viejo,is a different story entirely. Its shares are up 35% since August with a recent market value of $330 million.
For Sun and Skilled, their declines are partly due to Wall Street’s fall meltdown, which has sent Standard & Poor’s 500 index down about 30% since August. There also are perennial worries about cuts in government funding for nursing homes.
But the split with Ensign could come down to a big worry on the minds of investors these days: debt. Ensign seems to be defying Wall Street’s nursing home downturn because of its low debt and ample cash.
As of Sept. 30, Ensign had about $60 million in long-term debt and $56 million in cash and equivalents. The company’s debt-to-capital ratio is 20%, less than half that of Skilled and Sun.
At the end of the third quarter, Sun had long-term debt of $668 million and a debt ratio of 48%. Skilled had debt of $468 million for a 46% ratio.
“Even though (Sun and Skilled) don’t have any looming near-term maturities, the fact that they have debt on the balance sheet gets people concerned,” said Rob Mains, an analyst who follows Sun and Skilled for Morgan Keegan & Co., a Memphis-based brokerage.
Ensign’s lower debt provides the company with “ample capital to make more acquisitions and pursue further growth,” wrote Eric Gommel of St. Louis-based Stifel Nicolaus & Co. in a recent report.
Part of Ensign’s strategy is to buy underperforming nursing homes and turn them around, the analyst said.
For more on this story, see the Jan. 12 edition of the Business Journal.
