Omega Healthcare Investors is Setting Up for a Big Move – June 8, 2021

Omega Healthcare Investors Inc. (OHI) is a healthcare facility real estate investment trust that invests in the United States real estate markets. OHI’s portfolio focuses on long-term healthcare facilities. The company operates two segments, skilled nursing and senior housing, with skilled nursing contributing the majority of sales.

OHI is benefiting from an increased demand for healthcare services for an aging population. As the baby boomer generation keeps getting older, the need for nursing care will skyrocket. The company performed well over the last year, even during the pandemic, maintaining its dividend last year.

OHI has a current ratio of 3.1, which indicates it has more than enough liquidity to handle short-term debts. Plus, the company has a healthy 25% profit margin. In its most recent quarter, earnings were up 76.9% year over year, and are expected to rise 181% this year.

The stock appears a bit overvalued with a trailing P/E of 37.54, but that figure is well below the industry average. The stock has shown mixed performance over the past few months as shown in the chart below.

Take a look at the 1-year chart of OHI below with added notations:

OHI has moved into a sideways trading range over the past several months. While in the range, the stock has formed a resistance level at $39 (red), and a level of support at $35 (green), creating a rectangle pattern.

OHI is now sitting right in the middle of the range, but at some point the stock will have to either break the resistance or the support. The possible trades in OHI would be either on a breakout above $39 or a short if the stock were to break below $35.

Author: Christian Tharp, CMT