REIT Stocks

Kimco Realty Corp Valuation – March 2017 $KIM

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 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  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 Kimco Realty Corp (KIM) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Kimco Realty Corporation is a self-administered real estate investment trust. The Company is engaged in the ownership, management, development and operation of open-air shopping centers, which are anchored generally by discount department stores, grocery stores or drugstores. As of December 31, 2016, the Company had interests in 525 shopping center properties, aggregating 85.4 million square feet of gross leasable area (GLA), located in 34 states, Puerto Rico and Canada. As of December 31, 2016, the Company had 384 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 6.3 million square feet of GLA. The Company’s open-air shopping center properties had an average size of 162,618 square feet as of December 31, 2016. The Company’s open-air shopping center properties had various national and regional companies as competitors, such as TJX Companies, The Home Depot, Ahold Delhaize, Albertsons and Ross Stores.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of KIM – March 2017

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 $9,649,290,382 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.86 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 289.41% Pass
6. Moderate PEmg Ratio PEmg < 20 24.24 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.80 Pass
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 1.86 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 21.74 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

EPSmg $0.93
MG Growth Estimate 15.00%
MG Value $35.86
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $13.50
MG Value based on 0% Growth $7.92
Market Implied Growth Rate 7.87%
Current Price $22.58
% of Intrinsic Value 62.97%

Kimco Realty Corp is suitable for the Enterprising Investor but not 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 ratio. 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 Undervalued after growing its EPSmg (normalized earnings) from $0.33 in 2013 to an estimated $0.93 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Kimco Realty Corp revealed the company was trading above its Graham Number of $12.03. The company pays a dividend of $1.04 per share, for a yield of 4.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 24.24, which was below the industry average of 31.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.04.

Kimco Realty Corp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.04
Graham Number $12.03
PEmg 24.24
Current Ratio 1.86
PB Ratio 1.80
Current Dividend $1.04
Dividend Yield 4.58%
Number of Consecutive Years of Dividend Growth 7

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Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2016
Total Current Assets $503,301,000
Total Current Liabilities $270,268,000
Long-Term Debt $5,066,368,000
Total Assets $11,230,600,000
Intangible Assets $0
Total Liabilities $5,974,461,000
Shares Outstanding (Diluted Average) 419,709,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.52
Dec2016 $0.79
Dec2015 $2.00
Dec2014 $0.89
Dec2013 $0.43
Dec2012 $0.42
Dec2011 $0.27
Dec2010 $0.22
Dec2009 -$0.15
Dec2008 $0.78
Dec2007 $1.65
Dec2006 $1.70
Dec2005 $1.52
Dec2004 $1.15
Dec2003 $0.97
Dec2002 $0.98
Dec2001 $0.95
Dec2000 $0.84
Dec1999 $0.74
Dec1998 $0.66
Dec1997 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.93
Dec2016 $1.06
Dec2015 $1.06
Dec2014 $0.55
Dec2013 $0.33
Dec2012 $0.29
Dec2011 $0.33
Dec2010 $0.52
Dec2009 $0.82
Dec2008 $1.32
Dec2007 $1.53
Dec2006 $1.40
Dec2005 $1.20
Dec2004 $1.02
Dec2003 $0.94
Dec2002 $0.89
Dec2001 $0.81

Recommended Reading:

Other ModernGraham posts about the company

10 Best Dividend Paying Stocks for the Enterprising Investor – August 2016
Dividend Investors Should Research These 10 Stocks – July 2016
10 Companies for Enterprising Dividend Investors – June 2016
Kimco Realty Corp Stock Valuation – February 2016 $KIM
10 Undervalued Companies for Enterprising Dividend Investors – November 2015

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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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