National HealthCare Corp. – Value Analysis (NYSE MKT:NHC) : April 25, 2017

Capitalcube gives National HealthCare Corp. a score of 66.

Our analysis is based on comparing National HealthCare Corp. with the following peers – Capital Senior Living Corporation, Genesis Healthcare Inc Class A, Ensign Group, Inc., Five Star Senior Living Inc, Kindred Healthcare, Inc., AdCare Health Systems, Inc. and Diversicare Healthcare Services, Inc. (CSU-US, GEN-US, ENSG-US, FVE-US, KND-US, ADK-US and DVCR-US).

Investment Outlook

National HealthCare Corp. has a fundamental score of 66 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Considering peers, relative outperformance over the last year and the last month suggest a leading position.
  • It’s current Price/Book of 1.66 is about median in its peer group.
  • NHC-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • NHC-US has relatively high profit margins while operating with median asset turns.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • NHC-US‘s return on assets currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • The company’s median gross margin and relatively high pre-tax margins suggest non-differentiated product portfolio but with tight cost control relative to peers.
  • While NHC-US‘s revenues growth has been below the peer median in the last few years, the market still gives the stock a P/E ratio that is around peer median and seems to see the company as a long-term strategic bet.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • NHC-US has the financial and operating capacity to borrow quickly.

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Leverage & Liquidity

NHC-US has the financial and operating capacity to borrow quickly.

  • With debt at a relatively low 13.54% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 53.98%), and a well-cushioned interest coverage level of 16.36x, NHC-US can probably borrow quickly. We classify the company as Quick & Able in terms of its capacity to raise additional debt.
  • All 7 peers for the company have an outstanding debt balance.

NHC-US has maintained its Quick & Able profile from the prior year-end.

  • NHC-US‘s interest coverage is its lowest over the last four years and compares to a high of 218.77x in 2013.
  • The decrease in its interest coverage to 16.36x from 26.74x (in 2015) was also accompanied by a decrease in its peer median during this period to 0.63x from 1.31x.
  • Interest coverage fell 9.69 points relative to peers. It is also above the 2.50x coverage benchmark unlike the peer median.
  • NHC-US‘s debt-EV has declined 3.56 percentage points from last year’s high but remains above its four-year average debt-EV of 6.50.
  • Like the interest coverage trend, the decrease in its debt-EV (to 13.54% from 17.10%) was also accompanied by a decrease in its peer median during this period (to 53.98% from 57.03%).
  • Relative to peers, debt-EV fell 0.50 percentage points. Unlike the peer median, it is also below the 25% leverage benchmark.

Access the detailed analysis for National HealthCare Corp.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Capital Senior Living Corporation 68.38 1.01 0.64 6.24
Genesis Healthcare Inc Class A 99.43 1.23 0.48 3.72
Ensign Group, Inc. 21.05 1.58 11.32 55.38
Five Star Senior Living Inc 43.25 0.75 -3.15 20.6
Kindred Healthcare, Inc. 83.27 1.51 1.65 8.73
AdCare Health Systems, Inc. 51.62 0.81 0.62 -1.93
Diversicare Healthcare Services, Inc. 56.34 1.36 0.57 16.1
National HealthCare Corporation 13.54 1.93 16.36 66.79
Peer Median 53.98 1.3 0.63 12.41
Best In Class 13.54 1.93 16.36 66.79

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Company Profile

National HealthCare Corp. engages in the operation of health care centers. It provides sub and post-acute nursing care, intermediate nursing care, rehabilitative care, senior living services and home health care services. The company also offers management services, accounting and financial services and insurance services to third party owners of health care facilities. National HealthCare was founded by Carl E. Adams in 1971 and is headquartered in Murfreesboro, TN.

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