REIT Stocks

Boston Properties Inc Valuation – June 2016 $BXP

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Boston Properties Inc (BXP) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Boston Properties, Inc. is a real estate investment trust. The Company is an owner and developer of office properties in the United States. The Company’s segments by geographic area are Boston, New York, San Francisco and Washington, DC. The Company conducts its operations through Boston Properties Limited Partnership. The Company holds interests in approximately 170 commercial real estate properties, aggregating over 46.5 million net rentable square feet. The Company’s properties include approximately 160 office properties, a hotel, over five retail properties and approximately four residential properties. The Company’s properties include 399 Park Avenue in New York; 599 Lexington Avenue in New York; Bay Colony Corporate Center in Waltham; Embarcadero Center Four in San Francisco; Capital Gallery in Washington, DC; 680 Folsom Street in San Francisco; One Freedom Square in Reston; One Tower Center in East Brunswick, and 140 Kendrick Street in Needham.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of BXP – June 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,021,668,654 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.32 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -9.69% Fail
6. Moderate PEmg Ratio PEmg < 20 30.29 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.47 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.20 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

BXP value Chart June 2016

EPSmg $4.28
MG Growth Estimate 15.00%
MG Value $164.93
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $62.12
MG Value based on 0% Growth $36.41
Market Implied Growth Rate 10.89%
Current Price $129.75
% of Intrinsic Value 78.67%

Boston Properties, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.67 in 2012 to an estimated $4.28 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 10.89% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Boston Properties, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

BXP Charts June 2016

Net Current Asset Value (NCAV) -$70.73
Graham Number $68.96
PEmg 30.29
Current Ratio 4.32
PB Ratio 3.47
Current Dividend $2.60
Dividend Yield 2.00%
Number of Consecutive Years of Dividend Growth 0

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $2,539,727,000
Total Current Liabilities $587,384,000
Long-Term Debt $10,160,366,000
Total Assets $19,175,830,000
Intangible Assets $0
Total Liabilities $13,426,047,000
Shares Outstanding (Diluted Average) 153,917,000

Earnings Per Share History

Next Fiscal Year Estimate $5.85
Dec2015 $3.72
Dec2014 $2.83
Dec2013 $4.86
Dec2012 $1.92
Dec2011 $1.86
Dec2010 $1.14
Dec2009 $1.76
Dec2008 $1.03
Dec2007 $10.94
Dec2006 $7.46
Dec2005 $3.86
Dec2004 $2.61
Dec2003 $3.71
Dec2002 $4.66
Dec2001 $2.19
Dec2000 $2.01
Dec1999 $1.71
Dec1998 $1.52
Dec1997 $1.03

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $4.28
Dec2015 $3.35
Dec2014 $2.95
Dec2013 $2.77
Dec2012 $1.67
Dec2011 $2.14
Dec2010 $3.01
Dec2009 $4.30
Dec2008 $5.44
Dec2007 $7.00
Dec2006 $4.84
Dec2005 $3.49
Dec2004 $3.22
Dec2003 $3.30
Dec2002 $2.87
Dec2001 $1.88
Dec2000 $1.57

Recommended Reading:

Other ModernGraham posts about the company

Boston Properties Inc. Valuation – November 2015 Update $BXP
Boston Properties Inc. Analysis – August 2015 Update $BXP
47 Companies in the Spotlight This Week – 5/16/15
Boston Properties Inc. Quarterly Valuation – May 2015 $BXP
34 Companies in the Spotlight This Week – 2/7/15

Other ModernGraham posts about related companies

Simon Property Group Inc Valuation – June 2016 $SPG
AvalonBay Communities Inc Valuation – May 2016 $AVB
Weyerhaeuser Company Valuation – May 2016 $WY
Realty Income Corporation Valuation – May 2016 $O
Welltower Inc. Valuation – May 2016 $HCN
Starwood Property Trust Inc Stock Valuation – February 2016 $STWD
Kimco Realty Corp Stock Valuation – February 2016 $KIM
HCP Inc Valuation – January 2016 Update $HCP
Macerich Co Valuation – January 2016 Update $MAC
Kimco Realty Corp Stock Valuation – February 2016 $KIM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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