Five Star Quality Care (NASDAQ: FVE) and Genesis Healthcare (NYSE:GEN) are both small-cap medical companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, profitability, dividends, institutional ownership, valuation, analyst recommendations and earnings.

Profitability

This table compares Five Star Quality Care and Genesis Healthcare’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Five Star Quality Care -1.83% -18.10% -5.59%
Genesis Healthcare -8.58% N/A -3.07%

Insider and Institutional Ownership

21.3% of Five Star Quality Care shares are owned by institutional investors. Comparatively, 18.6% of Genesis Healthcare shares are owned by institutional investors. 39.8% of Five Star Quality Care shares are owned by company insiders. Comparatively, 57.6% of Genesis Healthcare shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Volatility & Risk

Five Star Quality Care has a beta of 1.02, indicating that its share price is 2% more volatile than the S&P 500. Comparatively, Genesis Healthcare has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Five Star Quality Care and Genesis Healthcare, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Five Star Quality Care 0 0 2 0 3.00
Genesis Healthcare 0 1 1 0 2.50

Five Star Quality Care presently has a consensus target price of $3.88, suggesting a potential upside of 142.19%. Genesis Healthcare has a consensus target price of $2.00, suggesting a potential upside of 153.16%. Given Genesis Healthcare’s higher probable upside, analysts clearly believe Genesis Healthcare is more favorable than Five Star Quality Care.

Earnings & Valuation

This table compares Five Star Quality Care and Genesis Healthcare’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Five Star Quality Care $1.38 billion 0.06 -$21.81 million ($0.51) -3.14
Genesis Healthcare $5.73 billion 0.02 -$64.01 million ($4.94) -0.16

Five Star Quality Care has higher earnings, but lower revenue than Genesis Healthcare. Five Star Quality Care is trading at a lower price-to-earnings ratio than Genesis Healthcare, indicating that it is currently the more affordable of the two stocks.

Summary

Five Star Quality Care beats Genesis Healthcare on 7 of the 13 factors compared between the two stocks.

About Five Star Quality Care

Five Star Senior Living Inc., formerly Five Star Quality Care, Inc., operates senior living communities, including independent living communities, assisted living communities and skilled nursing facilities (SNFs). The Company’s segments include senior living communities and rehabilitation and wellness. In the senior living communities segment, the Company operates for its own account or manage for the account of others independent living communities, assisted living communities and SNFs that are subject to centralized oversight and provide housing and services to elderly residents. In the rehabilitation and wellness segment, the Company provides services in the inpatient setting and in outpatient clinics. As of December 31, 2016, the Company operated 283 senior living communities located in 32 states with 31,830 living units, including 253 primarily independent and assisted living communities with 29,229 living units and 30 SNFs with 2,601 living units.

About Genesis Healthcare

Genesis Healthcare, Inc. is a holding company that provides post-acute care. The Company operates through three segments: inpatient services, which includes the operation of skilled nursing facilities and assisted or senior living facilities; rehabilitation therapy services, which includes its integrated and third-party rehabilitation and respiratory therapy services, and all other services. As of December 31, 2016, the Company offered inpatient services through its network of 499 skilled nursing and assisted/senior living facilities across 34 states, consisting of 473 skilled nursing facilities and 26 stand-alone assisted/senior living facilities. Its services focus primarily on the medical and physical issues facing elderly patients and are provided by its skilled nursing companies, assisted or senior living communities, integrated and third-party rehabilitation therapy business, and other ancillary services.

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