Capital Senior Living Stock Spreads

One day this week the spread between the bid and the ask for Capital Senior Living‘s shares seemed way too wide, which got me thinking.

I was a little surprised yesterday morning when I checked on the bid/ask spreads for Capital Senior Living, and saw a very wide discrepancy after the market opened. There was a bid for 4,000 shares at $3.48 per share, while a seller was asking for $3.98 per share for a smaller number of shares. 

I had not seen such a large difference between what a buyer wanted and a seller. I checked Brookdale Senior Living, and the spread was two cents. So, I re-looked at Capital Senior Living’s third quarter earnings to see what shareholders might be concerned with.

When earnings were reported, investors at first focused on the comments that sequential move-ins grew by 7%, and for the first time since mid-2018, move-ins were outpacing move-outs. That’s great, and we certainly hope it continues, but same-community occupancy dropped 130 basis points from the second quarter, and plunged 340 basis points from the third quarter of 2018. These were about the worst numbers we had seen this quarter. The result was a drop in same-community operating margin from 35% a year ago to 31% in this year’s third quarter. That tends to happen when revenues go down and expenses go up.

I think investors are still nervous, and cautious, about Cap Senior’s prospects, despite getting out of expensive leases, saving them over $3.0 million annually, and owning 62% of their properties. If the move-in/move-out ratio continues to be positive, census should turn around. But then there are those expenses that everyone is so concerned about for the sector. And by the way, the spread did return to normal levels.

 

 

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