Taking Stock of Sunlink Health Systems’ Risk Factors

Sunlink Health Systems, Inc. (SSY) provides healthcare products and services through its subsidiaries. It operates via two segments, Healthcare Services, and Pharmacy.

Amid the COVID-19 pandemic, Sunlink has seen a significant decrease in demand and net revenue in its healthcare businesses. The availability and cost of labor and medical supplies have negatively impacted the company. Its Pharmacy segment has seen lower sales trends in some areas coupled with higher costs and decreased staff.

Let’s take a look at Sunlink’s recent Fiscal Q4 performance, as well as what has changed in its key risk factors that investors should know.

In Q4, Sunlink’s consolidated net revenue dropped 3.3% year-over-year to $10.3 million, primarily due to a decrease in net revenues from extended care and rehabilitation services, and decreased Pharmacy segment revenue as a result of the continuing impact of the COVID-19 pandemic.

Despite the drop in revenue, the company reported an operating profit of $3 million compared to an operating loss of $352 thousand in the year-ago period. This turnaround was attributed to the recognition of $3.59 million of Employee Retention Credits (ERC). Sunlink also recognized an income of $1.4 million of Provider Relief Funds (PRF) received under the CARES Act.

Consequently, Sunlink generated net earnings per share of $0.64 compared to a net loss per share of $0.09 a year ago. (See Sunlink Health Systems stock charts on TipRanks)

Sunlink stated that going forward, it is unable to determine the extent to which the pandemic will continue to affect its assets and operations.

Now, let’s have a look at what’s changed in the company’s key risk factor profile.

According to the new Tipranks Risk Factors tool, Sunlink’s main risk category is Ability to Sell, accounting for 33% of the total 33 risks identified. In September, the company removed one key risk factor under the Finance & Corporate risk category.

Sunlink noted that it considered deregistering its common stock under the Exchange Act, and if it were to go private, then its stockholders would be subject to the risks of an investment in a private rather than a public company.

In such a scenario, stockholders could be affected by a decrease in the company’s public float, which is the number of shares owned by outside investors and available for trade in the securities markets. Further, the suspension of Sunlink’s reporting obligations under the Exchange Act may reduce the trading market for its shares and could lead to a decline in its share price, as well as liquidity.

Compared to a sector average of 9%, Sunlink’s Ability to Sell risk factor distribution is at 33%. Shares have lost 10.4% over the past six months.