A Side-by-side Analysis of Sabra Health Care REIT, Inc. (SBRA) and GEO Group, Inc. (GEO)

Sabra Health Care REIT, Inc. (NASDAQ:SBRA) shares are down more than -17.69% this year and recently increased 1.01% or $0.2 to settle at $20.10. GEO Group, Inc. (NYSE:GEO), on the other hand, is up 0.19% year to date as of 12/15/2017. It currently trades at $24.00 and has returned 0.42% during the past week.

Sabra Health Care REIT, Inc. (NASDAQ:SBRA) and GEO Group, Inc. (NYSE:GEO) are the two most active stocks in the REIT – Healthcare Facilities industry based on today’s trading volumes. The market is clearly enthusiastic about both these stocks, but which is the better investment? To answer this, we will compare the two companies based on the strength of their growth, profitability, risk, returns, valuation, analyst recommendations, and insider trends.


The ability to grow earnings at a compound rate over time is a crucial determinant of investment value. Analysts expect SBRA to grow earnings at a 6.00% annual rate over the next 5 years. Comparatively, GEO is expected to grow at a 15.00% annual rate. All else equal, GEO’s higher growth rate would imply a greater potential for capital appreciation.

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 19.29% for GEO Group, Inc. (GEO).

Cash Flow 

Cash is king when it comes to investing. SBRA’s free cash flow (“FCF”) per share for the trailing twelve months was -0.23. Comparatively, GEO’s free cash flow per share was -0.71. On a percent-of-sales basis, SBRA’s free cash flow was -0.02% while GEO converted -4.04% of its revenues into cash flow. This means that, for a given level of sales, SBRA is able to generate more free cash flow for investors.

Liquidity and Financial Risk

SBRA’s debt-to-equity ratio is 0.89 versus a D/E of 2.16 for GEO. GEO is therefore the more solvent of the two companies, and has lower financial risk.


SBRA trades at a forward P/E of 11.31, a P/B of 0.67, and a P/S of 11.50, compared to a forward P/E of 15.81, a P/B of 2.39, and a P/S of 1.30 for GEO. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. SBRA is currently priced at a -11.26% to its one-year price target of 22.65. Comparatively, GEO is -25.77% relative to its price target of 32.33. This suggests that GEO is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.70 for SBRA and 2.50 for GEO, which implies that analysts are more bullish on the outlook for SBRA.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. SBRA has a beta of 0.92 and GEO’s beta is 1.55. SBRA’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. SBRA has a short ratio of 4.11 compared to a short interest of 3.53 for GEO. This implies that the market is currently less bearish on the outlook for GEO.


GEO Group, Inc. (NYSE:GEO) beats Sabra Health Care REIT, Inc. (NASDAQ:SBRA) on a total of 7 of the 14 factors compared between the two stocks. GEO is more profitable, generates a higher return on investment and higher liquidity. GEO is more undervalued relative to its price target. Finally, GEO has better sentiment signals based on short interest.

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