What happened
Medical Properties Trust (MPW -1.10%), a healthcare real estate investment trust (REIT), is facing another steep decline in its share price today. The stock was trading 4.4% lower at 1:02 p.m. ET Thursday afternoon on moderate volume.
What is driving this downward trend? The market seems to be worried about the impact of the strong labor market data on the REIT's prospects. The latest data showed that the U.S. job market remains robust despite the Fed's tightening monetary policy.
This news is not only weighing on Medical Properties Trust's shares, but it is dragging every major U.S. stock index down as well. The S&P 500 and the Dow Jones Industrial Average were both off by approximately 1% in afternoon trading as a result of this economic update.
So what
One of the main risks facing the market is the possibility that the Federal Reserve will keep raising interest rates to curb inflation. Additionally, investors are worried that the strong demand for labor may compel the central bank to maintain high rates for a long time.
This is bad news for REITs such as Medical Properties Trust. These companies need access to low-cost capital to grow their business and create value for shareholders. High interest rates reduce their profitability, lower their tenants' spending power, and increase the chance of tenants defaulting on their payments.
Now what
Is Medical Properties Trust stock a bad news buy? I think so. Although the current business climate hasn't been kind to the healthcare REIT and more pain could be on the way, the company's shares are now trading at under 10 times projected earnings. That's an attractive valuation for long-term investors, despite the possibility of additional fallout from the central bank's protracted battle with inflation.
