MPW is in stage #4. The company recently started fighting back against one of the biggest short sellers. That caused the stock to bounce two weeks ago. But the company still faces strong headwinds as the interest rates rise fast and hospital owners are weak. It is ironic that MPW is one of the largest hospital REITs owning properties around the world but struggles with them.

 

 

The weekly chart above shows a rapid selloff after recovery from October lows. There is no sign of relief, at least not yet. The recent bounce may be another bounce in the end. The company now expects another hit to their earnings so this could be a problem and the stock may drop more. However, this could be a good opportunity, similar to 2008-2009 when the stock dropped hard as well:

 

 

Definitely, investing in MPW now you need strong guts to do it. If you are worried about the financial situation of MPW, then wait until this clears up.
Recently, there has been a lot of talk about the dividends and that the company will cut them because the current yield is not sustainable. But looking at the financials of the company, there still is no reason for a dividend cut:

 

 

As the free cash flow indicates, the company is bringing in approximately $180 bn in free cash and pays out approximately $162 bn in dividends.

 

 

MPW pays nice dividends and keeps raising it annually at a steady pace of 3% (5-year average). There appears to be only one cut so far in 2008 and that was obvious:

 

 

Earnings were steady, not overly growing but positive except in 4Q 2022. We may see another decline in 1Q 2023:

 

 

But this decline may already be included in the recent price as the stock trades significantly below its fair value.

 

 

The company’s debt is a concern. But recently they started improving their balance sheet and reducing their debt burden. Hopefully, this trend will continue:

 

 

The debt that was due in 2023-2024 was covered by cash and sales of their Australian assets. This can boost the cash flow even in the case of one of their tenants (Prospect) should pay $0 in rent (which is unlikely).

The short selling of this company is so intense (currently sits at 20% short interest) that there may be a short squeeze brewing under the hood. At some point, the short sellers will start taking their profits and that may spark more covering and rapid price action.

Investing in MPW can be risky but it seems the stock hit bottom. If so, the recovery can be rewarding.

 

 

The stock is now AGGRESSIVE BUY
 

This post was published in our newsletter to our subscribers on Saturday, April 9th, 2023. If you want to learn more about our stock technical analysis subscribe to our weekly newsletter.