On Tuesday, Truist Securities updated its outlook on NASDAQ:SBRA, Sabra Healthcare REIT (NASDAQ:SBRA) Inc., increasing the price target to $18 from the previous $16 while maintaining a Buy rating on the stock. The firm based its decision on the stock's funds from operations (FFO) multiple, which is used to gauge a real estate investment trust's operating performance.
Sabra Healthcare's FFO multiple is currently at 12.4 times, which is considered steady. The firm noted that this multiple is expected to be approximately one turn lower for its peers, Omega Healthcare (NYSE:OHI) Investors Inc. and National Health Investors (NYSE:NHI) Inc., both of which hold a Hold rating.
According to the firm, the FFO multiple discount of Sabra Healthcare to Omega's has been wider than the current margin only 17 times in the past 166 months since the end of 2010. Similarly, the discount to National Health Investors has only been this wide for the same number of months.
Sabra Healthcare is trading at a discount that is more than one turn wider than its average compared to Omega over the aforementioned period and two turns wider than its average against National Health Investors.
The firm suggests that it is reasonable to expect that Sabra Healthcare's relative discount could narrow, especially if the company's near-term growth meets projections. The projected annual net funds from operations (NFFO) growth for Sabra Healthcare between 2024 and 2027 stands at 3.9%, which is competitive with Omega's 4.2% and National Health Investors' 4.4%.
The firm's analysis indicates that while the current discount in Sabra Healthcare's FFO multiple is notable, there is potential for this gap to lessen in the near future. This adjustment in the price target reflects the firm's expectations of Sabra Healthcare's performance relative to its peers.
In other recent news, Sabra Healthcare REIT Inc . has been the focus of significant developments. Mizuho recently increased its price target for Sabra Healthcare shares to $18 from $17, maintaining an Outperform rating. The adjustment was driven by anticipated growth in the company's adjusted funds from operations (AFFO) leading into fiscal year 2025.
Despite debates about the extent of accretion from Sabra's capital allocation strategies, Mizuho sees the company’s AFFO growth trajectory as a positive factor.
Sabra Healthcare also reported robust growth in the second quarter of 2024, with a 17.7% increase in cash NOI, improved occupancy rates in senior housing and skilled nursing facilities, and a quarterly cash dividend of $0.30 per share. The company raised its full-year 2024 guidance, suggesting confidence in continued growth.
Additionally, the company's investment pipeline is robust, with approximately $0.75 billion of deals under review. Sabra's focus is on small, digestible deals rather than large portfolio acquisitions. The company expects a steady-state portfolio growth of 5% in AFFO per share once the managed portfolio stabilizes.
InvestingPro Insights
Following Truist Securities' positive outlook on Sabra Healthcare REIT Inc. (NASDAQ:SBRA), InvestingPro data and insights further underscore the potential of the company. With a market capitalization of $3.96 billion and a price-to-earnings (P/E) ratio that has adjusted to 34.63 in the last twelve months as of Q2 2024, Sabra Healthcare stands out for its financial stability. The PEG ratio, which measures the stock's value while taking into account expected earnings growth, is at an attractive 0.54, suggesting that the stock might be undervalued relative to its growth potential.
InvestingPro Tips highlight the expected net income growth this year and the fact that two analysts have revised their earnings upwards for the upcoming period, reinforcing the optimism around Sabra Healthcare's prospects. Moreover, the stock is trading at a low P/E ratio relative to near-term earnings growth, which is an encouraging sign for investors seeking growth at a reasonable price. Additionally, with a significant dividend yield of 7.04% and a history of maintaining dividend payments for 14 consecutive years, Sabra Healthcare demonstrates its commitment to returning value to shareholders.
For those interested in deeper analysis and more insights, there are over ten additional InvestingPro Tips available for Sabra Healthcare, which can be accessed at the dedicated InvestingPro page. This wealth of information could be invaluable for investors looking to make informed decisions about their investments in the healthcare REIT sector.
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