Medical Properties Trust (MPW) stock is cheap: Buy the 15% yield?

Medical Properties Trust (NYSE: MPW) stock price has been in a strong downward trend in the past few months as interest rates continue rising. The shares have crashed by 57.64% in the past 12 months and by 33.40% this year. This decline has seen its forward dividend yield jump to 15.10%.

Rising interest rates

Medical Properties Trust, like other Real Estate Investment Trust (REIT), has been hit by rising interest rates. As a result, the number of investors betting against the company has been rising. Its short interest has jumped to 19%.

For starters, Medical Properties Trust is a company that acquires and develops net-leased healthcare facilities. Its business strategy is to acquire properties and then lease them to healthcare companies with long-term leases. The company has over 440 facilities in 31 states and in seven countries. 

Medical Properties operates in a relatively stable business sector since people will always get sick. And as the population ages, demand for healthcare will keep rising. This explains why the company’s rent has been relatively stable. In 2022, the company’s rent billed jumped from $931 million to over $968 million. 

However, the MPW stock price has plunged because of the company’s total debt, which is substantial. The most recent results showed that its total debt stands at over $10 billion. As a result, the sharp increase in interest rates has pushed its interest expense upwards. In 2022, it spent over $359 million in interest expense. Its interest income was just $4 million.

The recent drop in MPW stock has made it reasonably valued. It has a price to earnings multiple of 6.31 which is lower than the sector median of 25.75. The EV to EBITDA of 11 is also lower than the sector median of 16.42 while the price-to-book ratio of 0.54 is also lower than the industry’s median of 1.56.

Medical Properties Trust stock forecast

The daily chart reveals that the Medical Properties Trust stock price has been in a bearish trend in the past few months. This decline is mostly because of higher rates and the financial health of most hospitals due to Covid. The stock has moved below all moving averages.

A closer look shows that the stock has formed a double-bottom pattern, which is usually a bullish sign. Therefore there is a likelihood that the stock will bounce back in the coming months since the Fed is considering pausing rate hikes. 

Still, since the stock is falling, the bullish view will be confirmed if it moves above the neckline of the double-bottom at $9. 

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