We came across a bullish thesis on PACS Group, Inc. (PACS) on WallStreetBets subreddit page by Isaac459. In this article, we will summarize the bulls’ thesis on PACS. PACS Group, Inc. share was trading at $39.01 as of Oct 9th. PACS’s trailing and forward P/E were 64.42 and 20.49 respectively according to Yahoo Finance.
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PACS is a skilled nursing facility (SNF) operator in the western U.S., which went public in April and has since seen its stock rise 77%. The company leases facilities and earns revenue through insurance reimbursement, based on the number of residents and services provided. They manage a growing portfolio of SNFs, positioning themselves as a leader in a fragmented industry.
Investing in PACS presents a compelling opportunity due to its strategy of acquiring underperforming facilities and turning them around. Their recent acquisition of 53 SNFs from Prestige Care expanded their facility count by 24%, with a significant number of these new facilities currently underperforming. With an average occupancy of 69% at the new facilities, PACS expects to drive occupancy and earnings growth, based on their track record of achieving 94% occupancy in facilities they’ve managed for over 18 months. The skilled nursing facility sector is poised for consolidation, with PACS well-positioned to capitalize. Potential staffing challenges are mitigated by the new facilities’ locations in urban areas, reducing the likelihood of labor shortages. The national shortage of elderly care units and increasing dementia rates further support occupancy growth, while continued high reimbursement rates should ensure profitability. Financially, PACS has impressive revenue growth of 29.1%. Adjusting for one-time IPO-related costs, their earnings grew by 98% in the first half of 2024 compared to the same period in 2023. With adjusted earnings per share of $1.93 and a trailing PE ratio of 21.1, PACS looks undervalued relative to its growth potential. The PEG ratio of 0.21 underscores the stock’s attractive valuation, making it an interesting investment for those looking to capitalize on the long-term growth prospects in the skilled nursing facility industry.
PACS Group, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held PACS at the end of the second quarter which was 0 in the previous quarter. While we acknowledge the risk and potential of PACS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PACS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.