Sabra Health Care REIT, Inc. (NASDAQ:SBRA) and Quality Care Properties, Inc. (NYSE:QCP) are the two most active stocks in the REIT – Healthcare Facilities industry based on today’s trading volumes. Investors are clearly interested in the two names, but is one a better choice than the other? We will compare the two companies across growth, profitability, risk, valuation, and insider trends to answer this question.
The value of a stock is simply the present value of its future free cash flows. SBRA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.13. Comparatively, QCP’s free cash flow per share was +0.20. On a percent-of-sales basis, SBRA’s free cash flow was -0% while QCP converted 0% of its revenues into cash flow. This means that, for a given level of sales, SBRA is able to generate more free cash flow for investors.
Liquidity and Financial Risk
Balance sheet risk is one of the biggest factors to consider before investing. SBRA’s debt-to-equity ratio is 1.22 versus a D/E of 0.66 for QCP. SBRA is therefore the more solvent of the two companies, and has lower financial risk.
SBRA trades at a forward P/E of 18.06, a P/B of 1.41, and a P/S of 5.73, compared to a forward P/B of 0.53, and a P/S of 3.26 for QCP. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Risk and Volatility
Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. SBRA has a beta of 0.90.
Insider Activity and Investor Sentiment
Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. SBRA has a short ratio of 8.29 compared to a short interest of 7.07 for QCP. This implies that the market is currently less bearish on the outlook for QCP.
Quality Care Properties, Inc. (NYSE:QCP) beats Sabra Health Care REIT, Inc. (NASDAQ:SBRA) on a total of 5 of the 7 factors compared between the two stocks. QCP is more profitable and has lower financial risk. In terms of valuation, QCP is the cheaper of the two stocks on book value and sales basis, Finally, QCP has better sentiment signals based on short interest.