Shares of Capital Senior Living Corp. (CSU) have been on an uptrend since late November, aided by strengthening market fundamentals and an improving outlook for the U.S. economy. The stock is currently trading at a 52-week high of $11.58, led by an earnings surprise of 40.0% in the first quarter of 2012 and an average earnings surprise of 25.6% over the past four quarters.
This healthcare services company currently retains a Zacks #1 Rank (Strong Buy). With expected earnings growth of 14.0% in 2012 and 40.4% in 2013, Capital Senior Living promises to be a solid momentum pick.
Strong First Quarter
On May 2, Capital Senior Living reported strong first quarter results with a 20.7% year-over-year growth in total revenues to $72.2 million. The healthy top-line was primarily attributable to incremental contribution from accretive acquisitions since the second half of 2011.
Adjusted net income increased 16.7% year over year to 7 cents per share, exceeding the Zacks Consensus Estimate by 2 cents. Adjusted EBITDAR surged 25.3% year over year to $25.7 million. Adjusted cash from facility operations (CFFO) increased 13.2% for the quarter to $6.5 million. Average monthly rent per occupied unit spiked 6.0% to $2,942.
Marginal Earnings Estimate Revision
Over the past 60 days, the Zacks Consensus Estimate for 2012 increased 3.6% to 29 cents, implying a year-over-year growth of 14.0%. For 2013, the Zacks Consensus Estimate is 40 cents, representing a year-over-year growth of 40.4%.
Premium Valuation
Capital Senior Living’s valuation looks a bit expensive on a price-to-earnings (P/E) and price-to-sales (P/S) basis. Shares of Capital Senior Living are currently trading at a forward P/E of 40.63x versus the peer group average of 13.48x. On a P/S basis, Capital Senior Living is currently trading at 1.18x versus 0.84x for the peer group average.
A healthy earnings growth prospect in the current and ensuing year warrants the premium valuation of the company.
Chart Resonates Growth Potential
Since January 24, 2012, Capital Senior Living shares have consistently fared better than the simple moving average for 200 days or SMA (200). The continuous uptrend in stock prices, as mirrored in the following chart, offers an enticing upside potential going forward. The stock has also outperformed the S&P 500 index since May 2, 2012 with a stupendous year-to-date return of 45.84%, compared to an S&P 500 tally of 9.16%. Volume is fairly strong, averaging 123K daily.
Headquartered in Dallas, Texas, Capital Senior Living operates a diverse portfolio of healthcare facilities across the U.S. Founded in 1996, the company is one of the largest operators of residential communities for the elderly. Its property portfolio includes independent living, assisted living, skilled nursing, and home care facilities in geographically concentrated regions with an aggregate capacity of approximately 12,600 residents. The company currently has a market cap of $320.7 million.
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