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HCP’s Performance in Comparison to Its Peers

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Peer valuations

HCP Inc. (HCP) has a diversified portfolio with 18 million square feet in medical offices, 8 million square feet in Life Science, and 46,000 senior housing units.

The company plans to increase its exposure to the Medical Office and Life Science portfolios and completely reduce its exposure to the skilled nursing facility. HCP also wants to increase the exposure to private pay to 96.0% from 78.0%.

The price-to-FFO multiple (funds from operation) is used to value REITs because they make multiple adjustments such as adding back depreciation and gains and losses on properties. HCP has a price-to-FFO multiple of 12.5x. In comparison to its peers, HCP is trading on par. Its peers have the following ratios:

  • Ventas (VTR): 12.6x
  • Welltower (HCN): 12.7x
  • Healthcare Trust of America (HTA): 19.2x

HCP has EPS (earning per share) of $0.86 and a PE (price-to-earnings) ratio of ~26.4x. Its peers have the following EPS metrics:

  • Ventas (VTR): $1.78
  • Welltower (HCN): $1.15
  • Healthcare Trust of America (HTA): $0.33

Its peers have the following PE (price-to-earnings) ratios:

  • Ventas (VTR): ~28.8x
  • Welltower (HCN): ~48.7x
  • Healthcare Trust of America (HTA): ~111.0x

Investors looking for exposure to the healthcare real estate sector can invest in REIT ETFs. HCP holds ~1.2% in the Vanguard REIT ETF (VNQ).

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Debt-to-equity ratios

HCP has a $2.0 billion credit facility with maturity in 2021, and the majority of its debt matures after 2019. HCP has a debt-to-equity ratio of ~148.4%.

Among its peers, Ventas (VTR), Welltower (HCN), and Healthcare Trust of America (HTA) have debt-to-equity ratios of ~103.8%, ~78.2%, and ~84.8%, respectively. In comparison to its peers, HCP is highly leveraged.

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