REIT Stocks

Apartment Investment & Management Co Valuation – July 2016 $AIV

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 Apartment Investment & Management Co (AIV) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Apartment Investment and Management Company (Aimco) is a self-administered and self-managed real estate investment trust. The Company, through its subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, holds the ownership interests in the Aimco Operating Partnership. Its segments include conventional real estate and affordable real estate. Its conventional real estate segment includes over 140 apartment communities with over 40,460 apartment homes. Its affordable real estate operations include approximately 60 apartment communities with over 8,680 apartment homes. The affordable segment consists of apartment communities, which it classifies as Affordable Same Store or Other Affordable. It owns and operates a portfolio of market-rate apartment communities. Aimco Operating Partnership conducts its business, which is focused on the ownership, management, redevelopment and limited development of apartment communities located in the coastal and job growth markets of the United States.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AIV – July 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 $7,090,925,666 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.38 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
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 261.73% Pass
6. Moderate PEmg Ratio PEmg < 20 24.66 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.33 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 0.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -15.75 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

AIV value chart July 2016

EPSmg $1.80
MG Growth Estimate 15.00%
MG Value $69.48
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $26.17
MG Value based on 0% Growth $15.34
Market Implied Growth Rate 8.08%
Current Price $44.51
% of Intrinsic Value 64.06%

Apartment Investment and Management Co does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.18 in 2012 to an estimated $1.8 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.08% 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 above the price.

Apartment Investment and Management Co receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

AIV charts July 2016

Net Current Asset Value (NCAV) -$28.08
Graham Number $21.75
PEmg 24.66
Current Ratio 0.38
PB Ratio 4.33
Current Dividend $1.23
Dividend Yield 2.76%
Number of Consecutive Years of Dividend Growth 6

[/not-level-free]

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 $154,612,000
Total Current Liabilities $403,357,000
Long-Term Debt $3,917,590,000
Total Assets $6,142,213,000
Intangible Assets $0
Total Liabilities $4,539,051,000
Shares Outstanding (Diluted Average) 156,117,000

Earnings Per Share History

Next Fiscal Year Estimate $2.28
Dec2015 $1.52
Dec2014 $2.06
Dec2013 $1.40
Dec2012 $0.61
Dec2011 -$0.86
Dec2010 -$1.08
Dec2009 -$1.00
Dec2008 $2.98
Dec2007 -$0.36
Dec2006 $1.00
Dec2005 -$0.18
Dec2004 $1.88
Dec2003 $0.70
Dec2002 $0.87
Dec2001 $0.23
Dec2000 $0.52
Dec1999 $0.38
Dec1998 $0.80
Dec1997 $1.08
Dec1996 $1.05

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.80
Dec2015 $1.36
Dec2014 $1.00
Dec2013 $0.25
Dec2012 -$0.18
Dec2011 -$0.40
Dec2010 -$0.01
Dec2009 $0.51
Dec2008 $1.20
Dec2007 $0.41
Dec2006 $0.81
Dec2005 $0.71
Dec2004 $1.05
Dec2003 $0.61
Dec2002 $0.56
Dec2001 $0.47
Dec2000 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Apartment Investment and Management Company Annual Valuation – 2015 $AIV
14 Companies in the Spotlight This Week – 1/4/14
ModernGraham Valuation: Apartment Investment & Management Co. (AIV)

Other ModernGraham posts about related companies

Crown Castle International Corp Valuation – June 2016 $CCI
General Growth Properties Inc Valuation – June 2016 $GGP
Boston Properties Inc Valuation – June 2016 $BXP
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

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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top