Five Star Quality Care (NASDAQ: FVE) and Brookdale Senior Living (NYSE:BKD) are both small-cap medical companies, but which is the better investment? We will compare the two companies based on the strength of their risk, dividends, earnings, profitability, valuation, analyst recommendations and institutional ownership.

Profitability

This table compares Five Star Quality Care and Brookdale Senior Living’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%
Brookdale Senior Living -17.85% -0.79% -0.17%

Insider and Institutional Ownership

21.3% of Five Star Quality Care shares are owned by institutional investors. Comparatively, 99.9% of Brookdale Senior Living shares are owned by institutional investors. 39.8% of Five Star Quality Care shares are owned by insiders. Comparatively, 1.5% of Brookdale Senior Living shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Five Star Quality Care and Brookdale Senior Living’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 0.05 -$21.81 million ($0.51) -2.94
Brookdale Senior Living $4.98 billion 0.40 -$404.39 million ($4.60) -2.30

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

Analyst Ratings

This is a breakdown of recent ratings and target prices for Five Star Quality Care and Brookdale Senior Living, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Five Star Quality Care 0 0 2 0 3.00
Brookdale Senior Living 0 0 5 0 3.00

Five Star Quality Care currently has a consensus price target of $3.88, suggesting a potential upside of 158.33%. Brookdale Senior Living has a consensus price target of $15.30, suggesting a potential upside of 44.34%. Given Five Star Quality Care’s higher probable upside, equities analysts plainly believe Five Star Quality Care is more favorable than Brookdale Senior Living.

Volatility and Risk

Five Star Quality Care has a beta of 1.01, suggesting that its share price is 1% more volatile than the S&P 500. Comparatively, Brookdale Senior Living has a beta of 1.73, suggesting that its share price is 73% more volatile than the S&P 500.

Summary

Brookdale Senior Living beats Five Star Quality Care on 7 of the 12 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 Brookdale Senior Living

Brookdale Senior Living Inc. operates senior living communities in the United States. The Company operates independent living, assisted living and dementia-care communities, and continuing care retirement centers (CCRCs). It operates through five segments: Retirement Centers; Assisted Living; CCRCs-Rental; Brookdale Ancillary Services and Management Services. The Retirement Centers segment includes owned or leased communities for middle to upper income seniors. The Assisted Living segment includes owned or leased communities that offer housing and round the clock assistance with activities of daily life to mid-acuity frail and elderly residents. The CCRCs-Rental segment includes leased communities that offer living arrangements to accommodate physical ability and health. The Brookdale Ancillary Services segment includes outpatient therapy, home health and hospice services, as well as education and wellness programs. The Management Services segment includes communities operated by it.

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