Skilled Healthcare Group: Aging Boomers Boost Growth

Sep. 4.08 | About: Skilled Healthcare (SKH)

Skilled Healthcare Group, Inc. (NYSE:SKH) has been posting solid gains in 2008 as the company continues to benefit from strong underlying demand for its services. Analyst estimates have been rising, and the company's share price recently set a new 52-week and all-time high.

Skilled Healthcare Group, Inc. provides integrated long-term healthcare services in the United States. Its nursing facilities provide such services as chemotherapy, dialysis and rehabilitation. The company has a market cap of $596 million and is headquartered in Foothill Ranch, California.

Industry Trend

With a rapidly aging domestic population applying pressure to the healthcare system, healthcare providers have seen a big up tick in demand for their services. This environmental shift was evident when Skilled Healthcare Group reported strong second-quarter earnings on Aug 5.

Revenue was up 19.3% from last year to $180.3 million. Net income increased to $8.9 million, a big jump from a loss of $4.1 million in the same quarter last year. This produced earnings of 24 cents per share, on target with analyst expectations.

Segment Growth

Revenues in Skilled Healthcare's largest business segment, long-term care services, posted very impressive gains, with revenue climbing to $159 million, a 20.4% increase form the same period last year.

Guidance Raised

During the quarterly announcement, the company also raised its 2008 full-year guidance, and now expects revenue to fall between $730 and $740 million, and earnings per share to land between 98 cents and $1.03.

The analyst community is also bullish on the company, with the next-year estimate pegged at $1.13 per share, a 12.73% earnings growth projection.

Based upon the current-year estimate, this stock is trading in line with the overall market, carrying a forward P/E multiple of 16X.