Capital Senior Living Corporation (CSU) is expected to grow in the range of 20% to 30% a year for several years, primarily through consolidation in the health care real estate industry, says Daniel Bernstein, Analyst at Stifel, Nicolaus & Co., Inc.
“Our favorite seniors housing pick is Capital Senior Living. It’s a little bit more growth than value. Capital Senior is a small-cap company; market cap is roughly $675 million, but it is a top-20 operator of seniors housing assets in the United States. We think it will grow somewhere between 20% and 30% a year, and we think that there is a multiyear growth opportunity at Capital Senior, primarily through consolidation in the industry,” Bernstein said.
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Bernstein says CSU is acquiring a significant amount of assets, with would grow the bottom-line cash flow on the double digits, all of this while the stock currently trades below his price expectations.
“It is acquiring about $150 million to $200 million of assets a year at a leveraged IRR of 15% to 20%, and again, along with good seniors housing fundamentals, we think its bottom-line cash flow can grow 20% to 30% a year. And the stock is significantly undervalued to our price target of $29,” Bernstein said.
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