RE:RE:The effect of rate hikes...monty613 wrote: jdsd0517 wrote: There is a back and forth on the effect of rate hikes on WELL, but that discussion in one dimensional. There are at least three effects:
- The one that is most discussed is that WELL's borrowing costs will rise. True but the company appears to have healthy debt service ratios, so probably not an issue.
- Rising rates will have an effect on availability of future credit; easy money becomes less "easy." This may have an impact on the company's ability to do large acquisitions down the road.
- Most importantly, rising rates affect the discount rate that sophisticated investors use to value a company (which is really just a set of cash flow streams). For the layman, this will manifest in the compression of multiples.
So rising rates will:
- have little to no effect on current operations
- make it harder to do deals in the future (for everyone, not just WELL)
- negatively impact the value of ALL COMPANIES as discount rates rise and multiples compress
On balance, rising rates are a net negative
fair commentary - but healthcare multiples are generally pretty stable and I do not foresee a major re-rate because of interest rates rising. in the private market multiples have not been crushed like publiccos. I think there is, and will be, a healthy demand for companies like MyHealth and CRH given their growth profile and cashflow profile.
the telehealth multiples already got smashed here and will likely never recover to what they were peak pandemic. I think stuff like TDOC and AMWL was trading at 20X Sales at one point (!!!). we likely won't see that again.
there is still huge amounts of liquidity in the lending market. WELL also has a healthy amount of credit pre-approved in the form of accordions, which will allow them to draw down on credit in the event a qualifying transaction(s) is made.
I am certainly not staying rising rates are good in any way for WELL, but they are manageable. they are certainly not the death blow for the company, like some posters are making it out to be.
Where did I say it was a death blow?
You clearly do not understand interest rates and the bond markets or even how money works (or, more specifically, the cost of money). I tried to explain things as clearly as possible here but obvious willful blindness affects readers here.