Why Diversicare Healthcare (DVCR) Stock Is Falling Today

NEW YORK (TheStreet) -- Shares of Diversicare Healthcare Services (DVCR) are down -3.71% to $7.01 after it announced completing the disposition of three skilled nursing centers in West Virginia, effective July 1.

One of the three properties was sold for $16.5 million while the other two facilities have an operations transfer agreement made possible through an amendment with Omega Healthcare Investors, Inc. (OHI) to terminate the so called, Master Lease.

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Separately, TheStreet Ratings team rates DIVERSICARE HEALTHCARE SVCS as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DIVERSICARE HEALTHCARE SVCS (DVCR) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Health Care Providers & Services industry. The net income has decreased by 5.7% when compared to the same quarter one year ago, dropping from -$0.97 million to -$1.02 million.
  • The debt-to-equity ratio is very high at 5.14 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, DVCR maintains a poor quick ratio of 0.85, which illustrates the inability to avoid short-term cash problems.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Health Care Providers & Services industry and the overall market, DIVERSICARE HEALTHCARE SVCS's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$4.57 million or 211.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for DIVERSICARE HEALTHCARE SVCS is currently extremely low, coming in at 12.35%. Regardless of DVCR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -1.22% trails the industry average.
  • You can view the full analysis from the report here: DVCR Ratings Report
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