American Renal Associates (NYSE: ARA) and Kindred Healthcare (NYSE:KND) are both small-cap medical companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, analyst recommendations, earnings, risk, valuation, profitability and institutional ownership.

Institutional and Insider Ownership

93.3% of American Renal Associates shares are owned by institutional investors. Comparatively, 89.6% of Kindred Healthcare shares are owned by institutional investors. 12.6% of American Renal Associates shares are owned by insiders. Comparatively, 3.0% of Kindred Healthcare shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

This table compares American Renal Associates and Kindred Healthcare’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Renal Associates -2.15% 15.80% 2.34%
Kindred Healthcare -8.06% 2.29% 0.30%

Risk & Volatility

American Renal Associates has a beta of 4.07, meaning that its stock price is 307% more volatile than the S&P 500. Comparatively, Kindred Healthcare has a beta of 1.2, meaning that its stock price is 20% more volatile than the S&P 500.

Earnings & Valuation

This table compares American Renal Associates and Kindred Healthcare’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Renal Associates $749.77 million 0.74 -$380,000.00 ($0.33) -53.48
Kindred Healthcare $7.22 billion 0.12 -$664.23 million ($6.02) -1.59

American Renal Associates has higher earnings, but lower revenue than Kindred Healthcare. American Renal Associates is trading at a lower price-to-earnings ratio than Kindred Healthcare, indicating that it is currently the more affordable of the two stocks.

Dividends

Kindred Healthcare pays an annual dividend of $0.12 per share and has a dividend yield of 1.3%. American Renal Associates does not pay a dividend. Kindred Healthcare pays out -2.0% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of current recommendations for American Renal Associates and Kindred Healthcare, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Renal Associates 0 0 4 0 3.00
Kindred Healthcare 1 4 1 0 2.00

American Renal Associates presently has a consensus price target of $20.00, suggesting a potential upside of 13.31%. Kindred Healthcare has a consensus price target of $8.83, suggesting a potential downside of 7.99%. Given American Renal Associates’ stronger consensus rating and higher possible upside, analysts clearly believe American Renal Associates is more favorable than Kindred Healthcare.

Summary

American Renal Associates beats Kindred Healthcare on 12 of the 16 factors compared between the two stocks.

About American Renal Associates

American Renal Associates Holdings, Inc. is a dialysis service provider in the United States focused on joint venture (JV) partnerships with physicians. As of December 31, 2016, the Company owned and operated 214 dialysis clinics in partnership with 379 nephrologist partners treating over 14,000 patients in 25 states and the District of Columbia. The Company operates its dialysis clinics exclusively through a JV model, in which it partners primarily with local nephrologists to develop, own and operate dialysis clinics, while the providers of the majority of dialysis services in the United States operate through a combination of subsidiaries and joint ventures. It provides patient care and clinical outcomes to patients suffering from end-stage renal disease (ESRD). Its clinics offer both in center and home dialysis options to meet the needs of patients. Its clinics primarily provide in center hemodialysis treatments and ancillary items and services.

About Kindred Healthcare

Kindred Healthcare, Inc., incorporated on March 27, 1998, is a healthcare services company. The Company, through its subsidiaries, operates transitional care (TC) hospitals, a home health, hospice and community care business, inpatient rehabilitation hospitals (IRFs), a contract rehabilitation services business, nursing centers and assisted living facilities across the United States. The Company operates through divisions: the Kindred at Home division, the hospital division, the Kindred Rehabilitation Services division and the nursing center division. These divisions represent six segments: home health services, hospice services, hospitals, Kindred Hospital Rehabilitation Services, RehabCare and nursing centers. The home health services and hospice services operating segments are contained within the Kindred at Home division while the Kindred Hospital Rehabilitation Services and RehabCare operating segments are both contained within the Kindred Rehabilitation Services division.

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