Ventas Stock in Brief

Ventas shares fell by -1.2% during the day's afternoon session, and are now trading at a price of $44.87. Is it time to buy the dip? To better answer that question, it's essential to check if the market is valuing the company's shares fairly in terms of its earnings and equity levels.

A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:

Ventas Inc., an S&P 500 company, operates at the intersection of two large and dynamic industries – healthcare and real estate. The company belongs to the Real Estate sector, which has an average price to earnings (P/E) ratio of 24.81 and an average price to book (P/B) ratio of 2.24. In contrast, Ventas has a trailing 12 month P/E ratio of -299.1 and a P/B ratio of 1.79.

When we divide Ventas's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -14.62. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.

The Business Is Unprofitable and Its Balance Sheet Is Highly Leveraged:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $3,873 $3,795 $3,828 $4,129
Operating Margins 22.0% 15.6% 11.0% 11.7%
Net Margins 11.18% 11.57% 1.28% -1.15%
Net Income (MM) $433 $439 $49 -$47
Net Interest Expense (MM) -452 -470 -440 -468
Net Interest Expense (MM) -$452 -$470 -$440 -$468
Depreciation & Amort. (MM) -$1,069 -$1,130 -$1,215 -$1,198
Earnings Per Share $1.17 $1.17 $0.13 -$0.15
EPS Growth n/a 0.0% -88.89% -215.38%
Diluted Shares (MM) 370 377 386 400
Free Cash Flow (MM) $877 $922 $593 $666
Capital Expenditures (MM) -$561 -$529 -$433 -$454
Net Current Assets (MM) -$13,205 -$12,584 -$13,017 -$13,183
Current Ratio 0.75 0.85 0.63 0.66
Long Term Debt (MM) $12,159 $11,895 $12,028 $12,297
Net Debt / EBITDA 6.8 6.01 7.15 7.87

Ventas has weak operating margins with a negative growth trend, declining EPS growth, and a highly leveraged balance sheet. On the other hand, the company has consistent free cash flow working in its favor. Furthermore, Ventas has stable revenues and decreasing reinvestment in the business.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.