Five Star Quality Care (NASDAQ: FVE) and Genesis Healthcare (NYSE:GEN) are both small-cap healthcare companies, but which is the better investment? We will compare the two companies based on the strength of their profitability, valuation, earnings, dividends, institutional ownership, risk and analyst recommendations.

Insider & Institutional Ownership

21.3% of Five Star Quality Care shares are owned by institutional investors. Comparatively, 18.7% of Genesis Healthcare shares are owned by institutional investors. 39.8% of Five Star Quality Care shares are owned by insiders. Comparatively, 57.6% of Genesis Healthcare shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Five Star Quality Care and Genesis Healthcare, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Five Star Quality Care 0 0 2 0 3.00
Genesis Healthcare 0 1 1 0 2.50

Five Star Quality Care currently has a consensus target price of $3.88, suggesting a potential upside of 158.33%. Genesis Healthcare has a consensus target price of $2.00, suggesting a potential upside of 172.11%. Given Genesis Healthcare’s higher possible upside, analysts clearly believe Genesis Healthcare is more favorable than Five Star Quality Care.

Risk and Volatility

Five Star Quality Care has a beta of 1.01, suggesting that its share price is 1% more volatile than the S&P 500. Comparatively, Genesis Healthcare has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500.

Valuation & Earnings

This table compares Five Star Quality Care and Genesis Healthcare’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Five Star Quality Care $1.38 billion 0.05 -$21.81 million ($0.53) -2.83
Genesis Healthcare $5.73 billion 0.02 -$64.01 million ($4.95) -0.15

Five Star Quality Care has higher earnings, but lower revenue than Genesis Healthcare. Five Star Quality Care is trading at a lower price-to-earnings ratio than Genesis Healthcare, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Five Star Quality Care and Genesis Healthcare’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Five Star Quality Care -1.83% -18.10% -5.59%
Genesis Healthcare -46.75% N/A -47.25%

Summary

Five Star Quality Care beats Genesis Healthcare on 8 of the 13 factors compared between the two stocks.

Five Star Quality Care Company Profile

Five Star Senior Living Inc., formerly Five Star Quality Care, Inc., operates senior living communities, including independent living communities, assisted living communities and skilled nursing facilities (SNFs). The Company’s segments include senior living communities and rehabilitation and wellness. In the senior living communities segment, the Company operates for its own account or manage for the account of others independent living communities, assisted living communities and SNFs that are subject to centralized oversight and provide housing and services to elderly residents. In the rehabilitation and wellness segment, the Company provides services in the inpatient setting and in outpatient clinics. As of December 31, 2016, the Company operated 283 senior living communities located in 32 states with 31,830 living units, including 253 primarily independent and assisted living communities with 29,229 living units and 30 SNFs with 2,601 living units.

Genesis Healthcare Company Profile

Genesis Healthcare, Inc. is a holding company that provides post-acute care. The Company operates through three segments: inpatient services, which includes the operation of skilled nursing facilities and assisted or senior living facilities; rehabilitation therapy services, which includes its integrated and third-party rehabilitation and respiratory therapy services, and all other services. As of December 31, 2016, the Company offered inpatient services through its network of 499 skilled nursing and assisted/senior living facilities across 34 states, consisting of 473 skilled nursing facilities and 26 stand-alone assisted/senior living facilities. Its services focus primarily on the medical and physical issues facing elderly patients and are provided by its skilled nursing companies, assisted or senior living communities, integrated and third-party rehabilitation therapy business, and other ancillary services.

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