Brookdale (BKD)

Senior living provider Brookdale Senior Living (NYSE:BKD) missed Wall Street’s revenue expectations in Q3 CY2025 as sales rose 3.7% year on year to $813.2 million. Its GAAP loss of $0.48 per share was significantly below analysts’ consensus estimates.

Company Overview

With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE:BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.

The senior health, home care, and hospice care industries provide essential services to aging populations and patients with chronic or terminal conditions. These companies benefit from stable, recurring revenue driven by relationships with patients and families that can extend many months or even years. However, the labor-intensive nature of the business makes it vulnerable to rising labor costs and staffing shortages, while profitability is constrained by reimbursement rates from Medicare, Medicaid, and private insurers. Looking ahead, the industry is positioned for tailwinds from an aging population, increasing chronic disease prevalence, and a growing preference for personalized in-home care. Advancements in remote monitoring and telehealth are expected to enhance efficiency and care delivery. However, headwinds such as labor shortages, wage inflation, and regulatory uncertainty around reimbursement could pose challenges. Investments in digitization and technology-driven care will be critical for long-term success.

Brookdale's main competitors in the senior living industry include Atria Senior Living, Life Care Services, Sunrise Senior Living, Discovery Senior Living, and Erickson Senior Living. The company also competes with major healthcare REITs like Ventas and Welltower for property acquisitions.

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $3.22 billion in revenue over the past 12 months, Brookdale has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Brookdale’s demand was weak over the last five years as its sales fell at a 2.6% annual rate. This wasn’t a great result and suggests it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Brookdale’s annualized revenue growth of 4.3% over the last two years is above its five-year trend, but we were still disappointed by the results.

This quarter, Brookdale’s revenue grew by 3.7% year on year to $813.2 million, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to decline by 3.4% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Brookdale was roughly breakeven when averaging the last five years of quarterly operating profits, lousy for a healthcare business.

On the plus side, Brookdale’s operating margin rose by 4.5 percentage points over the last five years. Zooming into its more recent performance, however, we can see the company’s margin has decreased by 3.1 percentage points on a two-year basis. If Brookdale wants to pass our bar, it must prove it can expand its profitability consistently.

In Q3, Brookdale generated a negative 6.6% operating margin. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Brookdale, its EPS declined by 56.1% annually over the last five years, more than its revenue. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

Diving into the nuances of Brookdale’s earnings can give us a better understanding of its performance. A five-year view shows Brookdale has diluted its shareholders, growing its share count by 29.6%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Brookdale reported EPS of negative $0.48, down from negative $0.22 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Brookdale to improve its earnings losses. Analysts forecast its full-year EPS of negative $1.31 will advance to negative $0.45.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

While Brookdale posted positive free cash flow this quarter, the broader story hasn’t been so clean. Brookdale’s demanding reinvestments have consumed many resources over the last five years, contributing to an average free cash flow margin of negative 2.8%. This means it lit $2.77 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Brookdale’s margin expanded by 7.5 percentage points during that time. Despite its improvement and recent free cash flow generation, we’d like to see more quarters of positive cash flow before recommending the stock.

Brookdale’s free cash flow clocked in at $114.9 million in Q3, equivalent to a 14.1% margin. This result was good as its margin was 12.7 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Brookdale’s five-year average ROIC was negative 0.4%, meaning management lost money while trying to expand the business. Investors are likely hoping for a change soon.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Brookdale’s ROIC averaged 3.2 percentage point increases over the last few years. This is a good sign, and we hope the company can continue improving.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Brookdale’s $5.50 billion of debt exceeds the $295.3 million of cash on its balance sheet. Furthermore, its 12× net-debt-to-EBITDA ratio (based on its EBITDA of $450.8 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Brookdale could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Brookdale can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We struggled to find many positives in these results. Its EPS missed and its revenue fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock remained flat at $9.06 immediately following the results.

Updated: December 3, 2025 at 11:01 PM EST

When considering an investment in Brookdale, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Brookdale isn’t a terrible business, but it isn’t one of our picks. For starters, its revenue has declined over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its rising cash profitability gives it more optionality, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities. On top of that, its operating margins reveal poor profitability compared to other healthcare companies.

Brookdale’s EV-to-EBITDA ratio based on the next 12 months is 5.5x. While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $11.44 on the company (compared to the current share price of $10.61).