Medical Properties (MPW), the real estate investment trust (REIT) specializing in acquiring hospital facilities (and one of the largest owners of hospital real estate worldwide), just reported yet another set of quarterly results heavily impacted by bankrupt tenants. With an EPS of 18 cents, MPW beat Wall St. estimates of -6 cents and improved upon the -$1.11 reported in Q4 2023. The trust also turned last year’s $122 million revenue loss into a $231 million profit. Times are so good at MPW that the company’s CEO, Edward Aldag, has vowed to “pursue a range of shareholder value initiatives in 2025.” Barry Oxford from Colliers Securities maintained his Buy rating on MPW earlier today.
I remain bullish on Medical Properties Trust as the stock trades at low cash flow multiples and a significant discount to its book value. When long-awaited market recognition is added to the equation, MPW is set for a sustained rally, as evidenced by this week’s bullish surge.
Resolute Business Model Saves MPW
Medical Properties Trust is a healthcare REIT specializing in hospital real estate. Just over half the company’s portfolio is U.S.-based, while the remainder is invested overseas, primarily in the UK. The company remains highly leveraged, with adjusted net debt of $8 billion accounting for 71% of its enterprise value of $11 billion, while common equity only accounts for 29%.
Recent results were significantly affected by impairments related to bankrupt tenants such as Steward Health Care and Prospect Medical Group. To adjust for these non-recurring impairments, MPT reported EPS of $0.18 in Q4 2024 and $0.80 for the entire year. However, both figures are down roughly 50% year-over-year, driven by deleveraging and the collection issues associated with bankrupt tenants. In parallel, the stock’s quarterly improvement resulted from higher revenues and marginally lower interest expenses.
Forward Outlook Brightens MPW Stock Prospects
Early in 2025, Medical Properties Trust raised financing at an average interest rate of 8%, well above the REIT’s current weighted average cost of debt of 4.259%. The increased interest expense primarily reflects the company’s debt-heavy capital structure, with financing rates for less indebted REITs several percentage points lower than MPT’s marginal cost of financing. The higher cost of debt is expected to weigh on future performance by $0.04/share in 2025, which will be more than offset by new tenants tanking over facilities previously managed by Steward Health Care. MPT expects a quarterly benefit of about $0.06/share from these new leases by October 2026.
All in all, I think that MPW’s metrics should improve from the current run rate of about $0.72/share to about $0.80/share in 2026. Meanwhile, MPW’s company’s quarterly dividend only stands at $0.08/share, and retained earnings are likely to be used to reduce the REIT’s massive debt pile.
Medical Properties’ Overlooked Valuation
MPT only trades at 7.7x its current normalized funds from operations (NFFO) run rate, or about 7x my $0.80/share NFFO outlook for 2026. This low valuation partially reflects the company’s high indebtedness.
An alternative way to value MPT would be to look at cash flows relative to enterprise value, with NFFO plus interest expense currently running at $838 million/year, with an increase to about $1 billion likely in 2026. Hence, currently, cash flows provide a 7.35% yield relative to the company’s enterprise value, with the return set to increase to about 8.75% in 2026. Notably, these cash flows already incorporate general and administrative expenses of about $134 million in 2024. However, NFFO most notably does not include litigation expenses, which were unusually high at $51 million in 2024.
Over the long term, the 7.35-8.75% returns offered by MPT will grow with inflation thanks to rent escalators. Returns on the company’s common stock are likely higher due to leverage but also come with increased risks. The company remains heavily dependent on stable financing conditions and continued policy normalization from the Federal Reserve.
Another way to value MPT is to look at the REIT’s book value, which, even after $2.44 billion in impairments/fair value adjustments in 2024, remains at $4.8 billion, well above the company’s market capitalization of $3.3 billion. This provides a comfortable margin of safety should MPT encounter additional tenant issues.
Considering the three valuation approaches outlined above, Medical Properties Trust remains attractively valued relative to large U.S. REIT peers, supporting my Buy rating for the company’s stock.
Is MPW Stock a Good Buy?
While I remain bullish on MPW stock, Wall Street does not share my enthusiasm. Medical Properties Trust’s stock currently has a consensus Hold rating based on one Buy, three Holds, and two Sell ratings. The average price target on MPW stock of $4.88 per share implies a 16% downside from current levels.
MPW’s Growth Story is Just Getting Started
Medical Properties Trust has resolved a multiplicity of tenant issues and addressed its near-term debt maturity concerns, with revenue streams set to stabilize as a result. With no significant debt maturing until 2027 at the earliest, shareholders can sleep easy for at least two years. MPW’s financial performance has improved, with earnings surpassing hawkish expectations with flying colors this week.
Moreover, sales and acquisitions, including the tie-up with Prospect Medical Group, are expected to deliver lucrative rewards in the coming years. Also, MPW is set to benefit in 2025-2026 as higher cash flows more than offset elevated interest expenses.
Given the confluence of factors, MPW remains a Buy thanks to a low NFFO multiple, attractive cash flows relative to enterprise value, and a deep discount to the trust’s book value. While the trust’s massive debt pile remains the primary risk for MPW bulls, I am confident that the company can reduce leverage thanks to its low payout ratio and continued disposals.