Emeritus Corporation: Reckless Growth And Chaos Is The Real Story

Emeritus Corporation (NYSE:ESC) is an operator of senior living communities in the United States. Emeritus operates a portfolio of communities, which are purpose built for services including assisted living, specialized (Alzheimer's and dementia) care, and in-home nursing. The story here is good, baby boomers getting older will seek out senior living and Emeritus is well positioned to capitalize from this trend. The true story, however, appears much darker.


Emeritus Corporation reminds me of the for-profit education sector. Back in 2008 and 2009, many who found themselves unemployed went back to school to improve their chances of re-entering the workforce and improving their earning power. Investors quickly caught on to this trend and looked for profit in education stocks. When the truth behind these companies came out -that students were saddled with debt and a degree from these institutions did not increase earning power, the stocks began to get hammered and have struggled ever since. The government then became interested in reforms, enrollment began to fall, and the stocks followed. So how does this all relate to Emeritus Corporation? I believe that there are many similarities between these two stories. In both cases investors saw a sector that would benefit from changing tastes and preferences, while ignoring what was really happening to those who are using the services.

Why The Bullish Case

There is most definitely a bullish case here, although that is the case for many stocks that eventually go down once the market figures out what is going on. The changing demographics in the United States will serve Emeritus Corporation well.

The table above is the predictions from the United States Census Bureau regarding the changes in population over the next eighteen years. Emeritus's target market, which is those 75 and older, is projected to grow by 78% over the next eighteen

This article was written by

Bleecker Street Research is focussed on situations where there are divergences between perception and reality. You can view our website and sign up for our mailing list at BleeckerStreetResearch.com.

Recommended For You

Comments (1)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.