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Here's Why Capital Senior Living Corporation Is Sliding Today

By Cory Renauer - Updated May 2, 2018 at 1:07PM

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Occupancy losses across the board aren't a good sign for the struggling senior housing operator.

What happened

Shares of Capital Senior Living Corporation (CSU -2.83%), a leading operator of senior housing communities, are in the red after the company reported first-quarter earnings results that missed on the top line. The stock was down 14.5% as of 12:56 p.m. EDT on Wednesday.

So what 

Investors expecting year-over-year growth were disappointed when Capital Senior Living reported a 1.2% first-quarter revenue loss after the bell on Tuesday. The slide is particularly unsettling because the company's annual operating profit slid 46% to just $7.8 million in 2017. That wasn't nearly enough to cover $49.5 million spent servicing a heavy debt load.

Person standing in front of downward sloping stock chart.

Image source: Getty Images.

If not for the impact of Hurricane Harvey, the top line would have climbed a bit instead of fallen, but investors probably couldn't take their eyes off of occupancy rates that slid 1.3% compared to the same period last year. Operations generated a $5.4 million profit, but $12.5 million spent servicing a heavy debt load led to a $7.2 million loss during the first three months of the year.

Now what

Although Capital Senior Living's operations are still profitable, the company needs to show investors clear signs of growth that they didn't see today. If anything, the company appears to be slowly sliding backward and drowning in debt.

The stock's been beaten down to an ultra-low valuation of just 0.6 trailing sales, but intrepid value hunters should proceed with extreme caution. Capital Senior finished March with a $22.7 million working capital shortfall. If operating profits don't reverse course soon, it's only a matter of time before creditors stop answering the phone.

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Capital Senior Living Corporation Stock Quote
Capital Senior Living Corporation
$20.74 (-2.83%) $0.60

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