Back to top

Image: Bigstock

Is Trending Stock Medical Properties Trust, Inc. (MPW) a Buy Now?

Read MoreHide Full Article

Medical Properties (MPW - Free Report) has been one of the most searched-for stocks on lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Over the past month, shares of this health care real estate investment trust have returned +18.8%, compared to the Zacks S&P 500 composite's +3.5% change. During this period, the Zacks REIT and Equity Trust - Other industry, which Medical Properties falls in, has gained 3.9%. The key question now is: What could be the stock's future direction?

Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.

Revisions to Earnings Estimates

Here at Zacks, we prioritize appraising the change in the projection of a company's future earnings over anything else. That's because we believe the present value of its future stream of earnings is what determines the fair value for its stock.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Medical Properties is expected to post earnings of $0.21 per share, indicating a change of -56.3% from the year-ago quarter. The Zacks Consensus Estimate has changed -26.6% over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $0.87 points to a change of -45.3% from the prior year. Over the last 30 days, this estimate has changed -20.9%.

For the next fiscal year, the consensus earnings estimate of $0.94 indicates a change of +8% from what Medical Properties is expected to report a year ago. Over the past month, the estimate has changed -19%.

Having a strong externally audited track record, our proprietary stock rating tool, the Zacks Rank, offers a more conclusive picture of a stock's price direction in the near term, since it effectively harnesses the power of earnings estimate revisions. Due to the size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, Medical Properties is rated Zacks Rank #5 (Strong Sell).

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

12-month consensus EPS estimate for MPW _12MonthEPSChartUrl

Revenue Growth Forecast

Even though a company's earnings growth is arguably the best indicator of its financial health, nothing much happens if it cannot raise its revenues. It's almost impossible for a company to grow its earnings without growing its revenue for long periods. Therefore, knowing a company's potential revenue growth is crucial.

In the case of Medical Properties, the consensus sales estimate of $251.2 million for the current quarter points to a year-over-year change of -25.6%. The $1 billion and $1.04 billion estimates for the current and next fiscal years indicate changes of +15% and +3.9%, respectively.

Last Reported Results and Surprise History

Medical Properties reported revenues of $271.32 million in the last reported quarter, representing a year-over-year change of -22.5%. EPS of -$1.23 for the same period compares with $0.05 a year ago.

Compared to the Zacks Consensus Estimate of $283.29 million, the reported revenues represent a surprise of -4.23%. The EPS surprise was -4%.

Over the last four quarters, Medical Properties surpassed consensus EPS estimates three times. The company could not beat consensus revenue estimates in any of the last four quarters.


No investment decision can be efficient without considering a stock's valuation. Whether a stock's current price rightly reflects the intrinsic value of the underlying business and the company's growth prospects is an essential determinant of its future price performance.

Comparing the current value of a company's valuation multiples, such as its price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), to its own historical values helps ascertain whether its stock is fairly valued, overvalued, or undervalued, whereas comparing the company relative to its peers on these parameters gives a good sense of how reasonable its stock price is.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Medical Properties is graded C on this front, indicating that it is trading at par with its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on might help determine whether or not it's worthwhile paying attention to the market buzz about Medical Properties. However, its Zacks Rank #5 does suggest that it may underperform the broader market in the near term.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

Medical Properties Trust, Inc. (MPW) - free report >>

Published in