AvalonBay Communities Inc Valuation – December 2018 $AVB

Company Profile (excerpt from Reuters): AvalonBay Communities, Inc., incorporated on March 13, 1995, is a real estate investment trust (REIT). The Company is focused on the development, redevelopment, acquisition, ownership and operation of multifamily communities primarily in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. The Company’s segments include Established Communities, Other Stabilized Communities and Development/Redevelopment Communities. Established Communities are operating communities that were owned and had stabilized occupancy and operating expenses. Other Stabilized Communities are all other operating communities that have stabilized occupancy and operating expenses, but that were not owned or had not achieved stabilization, as well as communities that are planned for disposition. Development/Redevelopment Communities consist of communities that are under construction, communities where substantial redevelopment is in progress and communities under lease-up. As of June 30, 2017, the Company owned or held a direct or indirect ownership interest in 287 apartment communities containing 83,123 apartment homes in 10 states and the District of Columbia, of which 23 communities were under development and nine communities were under redevelopment. The Company operates its apartment communities under three core brands: Avalon, AVA and Eaves by Avalon.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AVB – December 2018

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 $25,171,790,614 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.72 Fail
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 114.99% Pass
6. Moderate PEmg Ratio PEmg < 20 30.29 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.42 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 0.72 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -40.50 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 $6.01
MG Growth Estimate 6.84%
MG Value $133.38
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $87.18
MG Value based on 0% Growth $51.11
Market Implied Growth Rate 10.89%
Current Price $182.11
% of Intrinsic Value 136.54%

AvalonBay Communities Inc 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, high PEmg ratio. 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 Overvalued after growing its EPSmg (normalized earnings) from $4.13 in 2014 to an estimated $6.01 for 2018. This level of demonstrated earnings growth does not support 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 the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into AvalonBay Communities Inc revealed the company was trading above its Graham Number of $93.82. The company pays a dividend of $5.68 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 30.29, which was below the industry average of 80.08, 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 $-56.29.

AvalonBay Communities Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$56.29
Graham Number $93.82
PEmg 30.29
Current Ratio 0.72
PB Ratio 2.42
Current Dividend $5.68
Dividend Yield 3.12%
Number of Consecutive Years of Dividend Growth 6

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 9/1/2018
Total Current Assets $478,342,000
Total Current Liabilities $664,357,000
Long-Term Debt $7,533,228,000
Total Assets $18,662,119,000
Intangible Assets $0
Total Liabilities $8,264,721,000
Shares Outstanding (Diluted Average) 138,323,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.20
Dec2017 $6.35
Dec2016 $7.52
Dec2015 $5.51
Dec2014 $5.21
Dec2013 $2.78
Dec2012 $4.32
Dec2011 $4.87
Dec2010 $2.07
Dec2009 $1.93
Dec2008 $5.17
Dec2007 $4.38
Dec2006 $3.42
Dec2005 $4.05
Dec2004 $2.92
Dec2003 $3.73
Dec2002 $2.23
Dec2001 $3.02
Dec2000 $2.53
Dec1999 $2.03
Dec1998 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.01
Dec2017 $6.10
Dec2016 $5.68
Dec2015 $4.68
Dec2014 $4.13
Dec2013 $3.46
Dec2012 $3.75
Dec2011 $3.54
Dec2010 $3.05
Dec2009 $3.62
Dec2008 $4.31
Dec2007 $3.82
Dec2006 $3.45
Dec2005 $3.37
Dec2004 $2.99
Dec2003 $2.91
Dec2002 $2.45

Recommended Reading:

Other ModernGraham posts about the company

AvalonBay Communities Inc Valuation – February 2018 $AVB
AvalonBay Communities Inc Valuation – May 2016 $AVB
AvalonBay Communities Inc. Annual Valuation – 2014 $AVB

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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.

AvalonBay Communities Inc Valuation – February 2018 $AVB

Company Profile (obtained from Marketwatch): AvalonBay Communities, Inc. operates as a real estate investment trust, which engages in the development, redevelopment, acquisition, ownership, and operation of multifamily communities. It operates through the following segments: Established Communities, Other Stabilized Communities, and Development or Redevelopment Communities. The Established Communities segment refers to the operating communities that were owned and had stabilized occupancy. The Other Stabilized Communities segment includes all other completed communities that have stabilized occupancy. The Development or Redevelopment Communities segment consists of communities that are under construction. The company was founded by Gilbert M. Meyer in 1978 and is headquartered in Arlington, VA.

AVB Chart

AVB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AVB – February 2018

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 $21,545,664,869 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.37 Fail
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 104.40% Pass
6. Moderate PEmg Ratio PEmg < 20 27.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.08 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 0.37 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -18.41 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 $5.70
MG Growth Estimate 5.70%
MG Value $113.45
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $82.64
MG Value based on 0% Growth $48.44
Market Implied Growth Rate 9.44%
Current Price $156.02
% of Intrinsic Value 137.52%

AvalonBay Communities Inc 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, high PEmg ratio. 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 Overvalued after growing its EPSmg (normalized earnings) from $4.13 in 2014 to an estimated $5.7 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.44% 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 below the price.

At the time of valuation, further research into AvalonBay Communities Inc revealed the company was trading above its Graham Number of $84.91. The company pays a dividend of $5.68 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.38, which was below the industry average of 51.63, 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 $-56.36.

AvalonBay Communities Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$56.36
Graham Number $84.91
PEmg 27.38
Current Ratio 0.37
PB Ratio 2.08
Current Dividend $5.68
Dividend Yield 3.64%
Number of Consecutive Years of Dividend Growth 6

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 12/1/2017
Total Current Assets $234,592,000
Total Current Liabilities $632,776,000
Long-Term Debt $7,329,470,000
Total Assets $18,414,821,000
Intangible Assets $0
Total Liabilities $8,026,775,000
Shares Outstanding (Diluted Average) 138,248,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.26
Dec2017 $6.35
Dec2016 $7.52
Dec2015 $5.51
Dec2014 $5.21
Dec2013 $2.78
Dec2012 $4.32
Dec2011 $4.87
Dec2010 $2.07
Dec2009 $1.93
Dec2008 $5.17
Dec2007 $4.38
Dec2006 $3.42
Dec2005 $4.05
Dec2004 $2.92
Dec2003 $3.73
Dec2002 $2.23
Dec2001 $3.02
Dec2000 $2.53
Dec1999 $2.03
Dec1998 $1.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.70
Dec2017 $6.10
Dec2016 $5.68
Dec2015 $4.68
Dec2014 $4.13
Dec2013 $3.46
Dec2012 $3.75
Dec2011 $3.54
Dec2010 $3.05
Dec2009 $3.62
Dec2008 $4.31
Dec2007 $3.82
Dec2006 $3.45
Dec2005 $3.37
Dec2004 $2.99
Dec2003 $2.91
Dec2002 $2.45

Recommended Reading:

Other ModernGraham posts about the company

AvalonBay Communities Inc Valuation – May 2016 $AVB
AvalonBay Communities Inc. Annual Valuation – 2014 $AVB

Other ModernGraham posts about related companies

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REIT Industry Review – April 2017

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.

AvalonBay Communities Inc Valuation – May 2016 $AVB

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 – March 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 AvalonBay Communities Inc (AVB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AvalonBay Communities, Inc. is a real estate investment trust. The Company focuses on the development, redevelopment, acquisition, ownership and operation of multifamily communities primarily in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. It operates through segments, which include Established Communities, Other Stabilized Communities and Development/Redevelopment Communities. It owns or holds an interest in approximately 260 operating apartment communities containing over 75,380 apartment homes in approximately 10 states and the District of Columbia, of which over 10 communities containing approximately 3,430 apartment homes are under reconstruction. It operates its apartment communities under three core brands: Avalon, AVA and Eaves by Avalon. The real estate investments consist of operating apartment communities, communities in various stages of development and Development Rights.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AVB – May 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 $24,402,570,600 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 65.16% Pass
6. Moderate PEmg Ratio PEmg < 20 30.50 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.83 Fail
Score
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

AVB value chart May 2016

EPSmg $5.92
MG Growth Estimate 8.64%
MG Value $152.50
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $85.79
MG Value based on 0% Growth $50.29
Market Implied Growth Rate 11.00%
Current Price $180.44
% of Intrinsic Value 118.32%

AvalonBay Communities Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 Overvalued after growing its EPSmg (normalized earnings) from $3.75 in 2012 to an estimated $5.92 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 11% 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 below the price.

AvalonBay Communities Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

AVB charts May 2016

Net Current Asset Value (NCAV) -$70.73
Graham Number $21.74
PEmg 30.50
Current Ratio 4.32
PB Ratio 4.83
Current Dividend $5.10
Dividend Yield 2.83%
Number of Consecutive Years of Dividend Growth 5

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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 $8.24
12/1/2015 $5.51
12/1/2014 $5.21
12/1/2013 $2.78
12/1/2012 $4.32
12/1/2011 $4.87
12/1/2010 $2.07
12/1/2009 $1.93
12/1/2008 $5.17
12/1/2007 $4.38
12/1/2006 $3.57
12/1/2005 $4.21
12/1/2004 $2.92
12/1/2003 $3.73
12/1/2002 $2.23
12/1/2001 $3.12
12/1/2000 $2.53
12/1/1999 $2.00
12/1/1998 $1.37
12/1/1997 $1.40
12/1/1996 $1.02

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $5.92
12/1/2015 $4.68
12/1/2014 $4.13
12/1/2013 $3.46
12/1/2012 $3.75
12/1/2011 $3.54
12/1/2010 $3.06
12/1/2009 $3.65
12/1/2008 $4.36
12/1/2007 $3.89
12/1/2006 $3.54
12/1/2005 $3.43
12/1/2004 $3.00
12/1/2003 $2.93
12/1/2002 $2.44
12/1/2001 $2.39
12/1/2000 $1.91

Recommended Reading:

Other ModernGraham posts about the company

AvalonBay Communities Inc. Annual Valuation – 2014 $AVB

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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.

AvalonBay Communities Inc. Annual Valuation – 2014 $AVB

220px-AvalonBayCommunities_logoREITs often attract a great deal of investors because of their strong cash flows and dividends, and those investors often overlook other parts of the business, choosing to analyze the company under a different set of criteria than companies in other sectors.  This can create a problem in that it becomes difficult to compare a REIT to an industrial, which is fine if you use the typical top-down approach to stock selection; however, a top-down approach invites speculation in the fact that you are theorizing which sector will perform well going forward.  Benjamin Graham taught that we should avoid speculation as much as possible, which is why it is critical to develop a system for analyzing companies that will allow them to be compared across industries.  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 investment opportunity.  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 specific look at how AvalonBay Communities Inc. (AVB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): AvalonBay Communities, Inc. is a real estate investment trust (REIT) . It is engaged in developing, acquiring, owning and operating apartment communities in high barrier to entry markets of the United States. As of January 31, 2013, it owned a direct or indirect ownership interest in 178 operating apartment communities containing 52,427 apartment homes in nine states and the District of Columbia, of which 155 communities containing 45,056 apartment homes were consolidated for financial reporting purposes, two communities containing 674 apartment homes were held by joint ventures in which it holds an ownership interest, and 21 communities containing 6,697 apartment homes were owned by the Funds.The Company’s real estate investments consist of the segments include Established Communities, Other Stabilized Communities and Development/Redevelopment Communities.

PLD data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 4/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – FAIL
  3. Earnings Stability – positive earnings per share for at least 10 straight years – PASS
  4. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  5. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass at least 4 of the following 5 tests or be suitable for a defensive investor: Score = 3/5

  1. Sufficiently Strong Financial Condition, Part 1 – current ratio greater than 1.5 – FAIL
  2. Sufficiently Strong Financial Condition, Part 2 – Debt to Net Current Assets ratio less than 1.1 – FAIL
  3. Earnings Stability – positive earnings per share for at least 5 years – PASS
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $167.44
MG Value $124.05
MG Opinion Overvalued
Value Based on 3% Growth $69.74
Value Based on 0% Growth $40.88
Market Implied Growth Rate 13.16%
Net Current Asset Value (NCAV) -$47.76
PEmg 34.82
Current Ratio 1.01
PB Ratio 2.44

Balance Sheet – September 2014

Current Assets $536,000,000
Current Liabilities $531,000,000
Total Debt $6,291,000,000
Total Assets $15,881,000,000
Intangible Assets $0
Total Liabilities $6,836,000,000
Outstanding Shares 131,900,000

Earnings Per Share

2014 (estimate) $7.25
2013 $2.78
2012 $4.32
2011 $4.87
2010 $2.07
2009 $1.93
2008 $5.17
2007 $4.38
2006 $3.42
2005 $4.05
2004 $2.75

Earnings Per Share – ModernGraham

2014 (estimate) $4.81
2013 $3.46
2012 $3.75
2011 $3.54
2010 $3.05
2009 $3.62

Dividend History

Conclusion:

AvalonBay Communities is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the the lack of sufficient earnings growth over the last ten years, and the high PEmg ratio.  The Enterprising Investor is concerned with the high level of debt relative to the current assets.  As a result, value investors following the ModernGraham approach should explore other opportunities at this time.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $3.05 in 2010 to an estimated $4.81 in 2014.  This demonstrated level of growth does not support the market’s implied estimate of 13.16% earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model returns an estimate of intrinsic value that is below the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on AvalonBay Communities Inc. (AVB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in AvalonBay Communities Inc. (AVB) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia; this article is not affiliated with the company in any manner.

Host Hotels & Resorts Inc Valuation – February 2019 $HST

Company Profile (excerpt from Reuters): Host Hotels & Resorts, Inc. (Host Inc.), incorporated on September 28, 1998, operates as a self-managed and self-administered real estate investment trust (REIT). The Company operates through hotel ownership segment. The Company owned properties and conducted operations through Host Hotels & Resorts, L.P. (Host L.P.), of which Host Inc. was the general partner and of which it held approximately 99% of the partnership interests (OP units), as of December 31, 2016. As of February 20, 2017, its lodging portfolio consisted of 96 primarily luxury and upper-upscale hotels containing approximately 53,500 rooms, with the majority located in the United States, and with seven of the properties located outside of the United States in Australia, Brazil, Canada and Mexico. In addition, it owns non-controlling interests in two international joint ventures: approximately a 33% interest in a joint venture in Europe, which owns 10 luxury and upper-upscale hotels with approximately 3,900 rooms in Belgium, France, Germany, Spain, Sweden, the Netherlands and the United Kingdom, and a 9% indirect interest, through joint ventures, in five operating hotels and two hotels in the final stages of completion in India.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HST – February 2019

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 $13,386,799,159 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 7.13 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -494.12% Fail
6. Moderate PEmg Ratio PEmg < 20 20.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.81 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 7.13 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.51 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 $0.87
MG Growth Estimate 15.00%
MG Value $33.47
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $12.61
MG Value based on 0% Growth $7.39
Market Implied Growth Rate 6.13%
Current Price $18.04
% of Intrinsic Value 53.90%

Host Hotels and Resorts Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, 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 $0.43 in 2014 to an estimated $0.87 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.13% 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 Host Hotels and Resorts Inc revealed the company was trading above its Graham Number of $13.82. The company pays a dividend of $0.8 per share, for a yield of 4.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.75, which was below the industry average of 81.61, 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 $-3.88.

Host Hotels and Resorts Inc performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.88
Graham Number $13.82
PEmg 20.75
Current Ratio 7.13
PB Ratio 1.81
Current Dividend $0.80
Dividend Yield 4.43%
Number of Consecutive Years of Dividend Growth 0

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 9/1/2018
Total Current Assets $1,889,000,000
Total Current Liabilities $265,000,000
Long-Term Debt $4,079,000,000
Total Assets $12,155,000,000
Intangible Assets $0
Total Liabilities $4,760,000,000
Shares Outstanding (Diluted Average) 740,500,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.90
Dec2017 $0.76
Dec2016 $1.02
Dec2015 $0.74
Dec2014 $0.96
Dec2013 $0.42
Dec2012 $0.08
Dec2011 -$0.02
Dec2010 -$0.21
Dec2009 -$0.45
Dec2008 $0.72
Dec2007 $1.30
Dec2006 $1.45
Dec2005 $0.37
Dec2004 -$0.12
Dec2003 -$0.07
Dec2002 -$0.19
Dec2001 $0.08
Dec2000 $0.62
Dec1999 $0.90
Dec1998 $0.22

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.87
Dec2017 $0.83
Dec2016 $0.79
Dec2015 $0.60
Dec2014 $0.43
Dec2013 $0.10
Dec2012 -$0.03
Dec2011 $0.03
Dec2010 $0.22
Dec2009 $0.52
Dec2008 $0.92
Dec2007 $0.87
Dec2006 $0.54
Dec2005 $0.06
Dec2004 -$0.04
Dec2003 $0.09
Dec2002 $0.22

Recommended Reading:

Other ModernGraham posts about the company

Host Hotels & Resorts Inc Valuation – April 2018 $HST
Host Hotels and Resorts Inc Valuation – July 2016 $HST
23 Companies in the Spotlight This Week – 3/9/15
Host Hotels and Resorts Inc. Annual Valuation – 2015 $HST
16 Companies in the Spotlight This Week – 3/8/14

Other ModernGraham posts about related companies

Vornado Realty Trust Valuation – January 2019 $VNO
Public Storage Valuation – January 2019 $PSA
Macerich Co Valuation – January 2019 $MAC
HCP Inc Valuation – January 2019 $HCP
Apartment Investment and Management Co Valuation – January 2019 $AIV
Simon Property Group Inc Valuation – January 2019 $SPG
Crown Castle International Corp Valuation – January 2019 $CCI
Welltower Inc Valuation – January 2019 $WELL
Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB

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.

Vornado Realty Trust Valuation – January 2019 $VNO

Company Profile (excerpt from Reuters): Vornado Realty Trust, incorporated on March 29, 1993, is a real estate investment trust (REIT). The Company conducts its business through Vornado Realty L.P. (the Operating Partnership). The Company operates through two segments: New York and Washington, DC. The Company’s interests in properties are held by the Operating Partnership. As of December 31, 2016, the Company owned the 3.7 million square foot Mart (theMart) in Chicago. As of December 31, 2016, the Company had controlling interest in a three-building office complex containing 1.8 million square feet, known as the Bank of America Center, located at California and Montgomery Streets, in San Francisco’s financial district (555 California Street).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VNO – January 2019

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 $13,188,708,333 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.64 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 -13.85% Fail
6. Moderate PEmg Ratio PEmg < 20 27.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.22 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 4.64 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 6.48 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 $2.53
MG Growth Estimate 0.25%
MG Value $22.75
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $36.67
MG Value based on 0% Growth $21.49
Market Implied Growth Rate 9.45%
Current Price $69.31
% of Intrinsic Value 304.69%

Vornado Realty Trust 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 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 Overvalued after growing its EPSmg (normalized earnings) from $2.49 in 2011 to an estimated $2.53 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.45% 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 below the price.

At the time of valuation, further research into Vornado Realty Trust revealed the company was trading above its Graham Number of $30.1. The company pays a dividend of $2.62 per share, for a yield of 3.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 27.41, which was below the industry average of 70.5, 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 $-45.94.

Vornado Realty Trust receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$45.94
Graham Number $30.10
PEmg 27.41
Current Ratio 4.64
PB Ratio 2.22
Current Dividend $2.62
Dividend Yield 3.78%
Number of Consecutive Years of Dividend Growth 1

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 9/1/2018
Total Current Assets $1,926,900,000
Total Current Liabilities $415,531,000
Long-Term Debt $9,792,659,000
Total Assets $16,678,020,000
Intangible Assets $139,994,000
Total Liabilities $10,715,929,000
Shares Outstanding (Diluted Average) 191,327,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Dec2017 $0.85
Dec2016 $4.34
Dec2015 $3.59
Dec2011 $3.23
Dec2010 $3.24
Dec2009 $0.28
Dec2008 $2.10
Dec2007 $3.17
Dec2006 $3.34
Dec2005 $3.49
Dec2004 $4.33
Dec2003 $3.73
Dec2002 $1.87
Dec2001 $2.42
Dec2000 $2.16
Dec1999 $1.90
Dec1998 $1.56
Dec1997 $0.78
Dec1996 $1.23
Dec1995 $2.21

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.53
Dec2017 $2.81
Dec2016 $3.50
Dec2015 $2.88
Dec2011 $2.49
Dec2010 $2.22
Dec2009 $1.96
Dec2008 $2.96
Dec2007 $3.47
Dec2006 $3.53
Dec2005 $3.47
Dec2004 $3.28
Dec2003 $2.64
Dec2002 $2.06
Dec2001 $2.02
Dec2000 $1.72
Dec1999 $1.52

Recommended Reading:

Other ModernGraham posts about the company

Vornado Realty Trust Valuation – April 2018 $VNO
Vornado Realty Trust Valuation – July 2016 $VNO
30 Companies in the Spotlight This Week – 5/23/15
Vornado Realty Trust Annual Valuation – 2015 $VNO
16 Companies in the Spotlight This Week – 5/24/14

Other ModernGraham posts about related companies

Public Storage Valuation – January 2019 $PSA
Macerich Co Valuation – January 2019 $MAC
HCP Inc Valuation – January 2019 $HCP
Apartment Investment and Management Co Valuation – January 2019 $AIV
Simon Property Group Inc Valuation – January 2019 $SPG
Crown Castle International Corp Valuation – January 2019 $CCI
Welltower Inc Valuation – January 2019 $WELL
Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB
Weyerhaeuser Co Valuation – December 2018 $WY

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.

Public Storage Valuation – January 2019 $PSA

Company Profile (excerpt from Reuters): Public Storage, incorporated on March 13, 2007, is a real estate investment trust (REIT). The Company’s principal business activities include the ownership and operation of self-storage facilities, which offer storage spaces for lease, generally on a month-to-month basis, for personal and business use, ancillary activities, such as merchandise sales and tenant reinsurance to the tenants at its self-storage facilities, as well as the acquisition and development of additional self-storage space. The Company’s segments include Self-Storage Operations, Ancillary Operations, Investment in PS Business Parks, Inc. (PSB) and Investment in Shurgard Europe.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PSA – January 2019

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 $35,967,888,219 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.06 Fail
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 130.08% Pass
6. Moderate PEmg Ratio PEmg < 20 30.47 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.04 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 1.06 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 62.87 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 $6.79
MG Growth Estimate 7.99%
MG Value $166.23
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $98.45
MG Value based on 0% Growth $57.71
Market Implied Growth Rate 10.98%
Current Price $206.86
% of Intrinsic Value 124.44%

Public Storage 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, 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 Overvalued after growing its EPSmg (normalized earnings) from $4.43 in 2014 to an estimated $6.79 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.98% 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 below the price.

At the time of valuation, further research into Public Storage revealed the company was trading above its Graham Number of $68.7. The company pays a dividend of $8 per share, for a yield of 3.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 30.47, which was below the industry average of 70.5, 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 $-8.

Public Storage scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$8.00
Graham Number $68.70
PEmg 30.47
Current Ratio 1.06
PB Ratio 4.04
Current Dividend $8.00
Dividend Yield 3.87%
Number of Consecutive Years of Dividend Growth 8

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 9/1/2018
Total Current Assets $432,525,000
Total Current Liabilities $409,973,000
Long-Term Debt $1,417,945,000
Total Assets $10,747,940,000
Intangible Assets $209,317,000
Total Liabilities $1,827,918,000
Shares Outstanding (Diluted Average) 174,348,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.42
Dec2017 $6.73
Dec2016 $6.81
Dec2015 $6.07
Dec2014 $5.25
Dec2013 $4.89
Dec2012 $3.90
Dec2011 $3.29
Dec2010 $2.35
Dec2009 $3.47
Dec2008 $4.18
Dec2007 $1.17
Dec2006 $0.33
Dec2005 $1.97
Dec2004 $1.38
Dec2003 $1.28
Dec2002 $1.14
Dec2001 $1.39
Dec2000 $1.41
Dec1999 $1.52
Dec1998 $1.30

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $6.79
Dec2017 $6.30
Dec2016 $5.85
Dec2015 $5.14
Dec2014 $4.43
Dec2013 $3.87
Dec2012 $3.39
Dec2011 $3.05
Dec2010 $2.72
Dec2009 $2.68
Dec2008 $2.13
Dec2007 $1.14
Dec2006 $1.16
Dec2005 $1.53
Dec2004 $1.31
Dec2003 $1.30
Dec2002 $1.32

Recommended Reading:

Other ModernGraham posts about the company

Public Storage Valuation – March 2018 $PSA
Public Storage Valuation – July 2016 $PSA
24 Companies in the Spotlight This Week – 3/28/15
Public Storage Annual Valuation – 2015 $PSA
17 Companies in the Spotlight This Week – 3/22/14

Other ModernGraham posts about related companies

Macerich Co Valuation – January 2019 $MAC
HCP Inc Valuation – January 2019 $HCP
Apartment Investment and Management Co Valuation – January 2019 $AIV
Simon Property Group Inc Valuation – January 2019 $SPG
Crown Castle International Corp Valuation – January 2019 $CCI
Welltower Inc Valuation – January 2019 $WELL
Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB
Weyerhaeuser Co Valuation – December 2018 $WY
Alexandria Real Estate Equities Inc Valuation – November 2018 $ARE

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.

Macerich Co Valuation – January 2019 $MAC

Company Profile (excerpt from Reuters): The Macerich Company is a self-administered and self-managed real estate investment trust (REIT). The Company is involved in the acquisition, ownership, development, redevelopment, management, and leasing of regional shopping centers located throughout the United States. The Company owns ownership interests in, The Macerich Partnership, L.P. (the Operating Partnership).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAC – January 2019

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 $6,508,088,439 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 Fail
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 82.27% Pass
6. Moderate PEmg Ratio PEmg < 20 20.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.98 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 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -374.30 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 Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.28
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $33.11
MG Value based on 0% Growth $19.41
Market Implied Growth Rate 5.85%
Current Price $46.14
% of Intrinsic Value N/A

Macerich 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, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $4.96 in 2014 to an estimated $2.28 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.85% 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 below the price.

At the time of valuation, further research into Macerich Co revealed the company was trading above its Graham Number of $18.78. The company pays a dividend of $2.87 per share, for a yield of 6.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 20.21, which was below the industry average of 70.5, 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 $-38.14.

Macerich Co scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$38.14
Graham Number $18.78
PEmg 20.21
Current Ratio 0.96
PB Ratio 1.98
Current Dividend $2.87
Dividend Yield 6.22%
Number of Consecutive Years of Dividend Growth 6

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 9/1/2018
Total Current Assets $337,069,000
Total Current Liabilities $350,088,000
Long-Term Debt $4,872,983,000
Total Assets $9,010,730,000
Intangible Assets $21,868,000
Total Liabilities $5,722,801,000
Shares Outstanding (Diluted Average) 141,196,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.60
Dec2017 $1.02
Dec2016 $3.52
Dec2015 $3.08
Dec2014 $10.45
Dec2013 $3.00
Dec2012 $2.51
Dec2011 $1.18
Dec2010 $0.19
Dec2009 $1.45
Dec2008 $2.17
Dec2007 $0.98
Dec2006 $3.07
Dec2005 $0.85
Dec2004 $1.35
Dec2003 $2.01
Dec2002 $1.56
Dec2001 $1.66
Dec2000 $1.07
Dec1999 $2.88
Dec1998 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.28
Dec2017 $3.49
Dec2016 $4.65
Dec2015 $4.83
Dec2014 $4.96
Dec2013 $2.03
Dec2012 $1.53
Dec2011 $1.09
Dec2010 $1.22
Dec2009 $1.72
Dec2008 $1.80
Dec2007 $1.63
Dec2006 $1.89
Dec2005 $1.36
Dec2004 $1.59
Dec2003 $1.75
Dec2002 $1.63

Recommended Reading:

Other ModernGraham posts about the company

Macerich Co Valuation – March 2018 $MAC
Macerich Co Valuation – July 2016 $MAC
10 Undervalued Companies for the Defensive Dividend Stock Investor – February 2016
19 Best Stocks For Value Investors This Week – 1/9/16
Macerich Co Valuation – January 2016 Update $MAC

Other ModernGraham posts about related companies

HCP Inc Valuation – January 2019 $HCP
Apartment Investment and Management Co Valuation – January 2019 $AIV
Simon Property Group Inc Valuation – January 2019 $SPG
Crown Castle International Corp Valuation – January 2019 $CCI
Welltower Inc Valuation – January 2019 $WELL
Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB
Weyerhaeuser Co Valuation – December 2018 $WY
Alexandria Real Estate Equities Inc Valuation – November 2018 $ARE
LaSalle Hotel Properties Valuation – September 2018 $LHO

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.

HCP Inc Valuation – January 2019 $HCP

Company Profile (excerpt from Reuters): HCP, Inc., incorporated on March 21, 1985, is a self-administered real estate investment trust (REIT). The Company invests primarily in real estate serving the healthcare industry in the United States. The Company’s segments include senior housing triple-net (SH NNN), senior housing operating portfolio (SHOP), life science and medical office. As of December 31, 2016, the Company had interests in and managed 15 hospitals, 61 care homes in the United Kingdom and five post-acute/skilled nursing facilities (SNFs). Services provided by its tenants and operators in hospitals are paid for by private sources, third-party payors, such as insurance or through Medicare and Medicaid programs. Its hospital property types include acute care, long-term acute care, specialty and rehabilitation hospitals. Its care homes are registered to provide various levels of services, ranging from personal care to nursing care. SNFs offer restorative, rehabilitative and custodial nursing care for people.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HCP – January 2019

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 $14,276,913,709 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.41 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 4.46% Fail
6. Moderate PEmg Ratio PEmg < 20 44.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.48 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 1.41 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 40.06 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.67
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $9.73
MG Value based on 0% Growth $5.71
Market Implied Growth Rate 17.91%
Current Price $29.76
% of Intrinsic Value N/A

HCP, Inc. 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 or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability or growth over the last five years. 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 Overvalued after seeing its EPSmg (normalized earnings) decline from $1.85 in 2014 to an estimated $0.67 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.91% 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 below the price.

At the time of valuation, further research into HCP, Inc. revealed the company was trading above its Graham Number of $12.24. The company pays a dividend of $1.48 per share, for a yield of 5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 44.33, which was below the industry average of 70.5, 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 $-14.6.

HCP, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$14.60
Graham Number $12.24
PEmg 44.33
Current Ratio 1.41
PB Ratio 2.48
Current Dividend $1.48
Dividend Yield 4.97%
Number of Consecutive Years of Dividend Growth 0

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 9/1/2018
Total Current Assets $580,505,000
Total Current Liabilities $410,804,000
Long-Term Debt $6,798,253,000
Total Assets $13,083,958,000
Intangible Assets $305,805,000
Total Liabilities $7,443,583,000
Shares Outstanding (Diluted Average) 470,118,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.59
Dec2017 $0.88
Dec2016 $1.34
Dec2015 -$1.21
Dec2014 $2.00
Dec2013 $2.13
Dec2012 $1.90
Dec2011 $1.29
Dec2010 $1.00
Dec2009 $0.40
Dec2008 $1.79
Dec2007 $2.71
Dec2006 $2.66
Dec2005 $1.12
Dec2004 $1.11
Dec2003 $0.97
Dec2002 $0.96
Dec2001 $0.85
Dec2000 $1.07
Dec1999 $1.13
Dec1998 $1.27

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.67
Dec2017 $0.82
Dec2016 $0.93
Dec2015 $0.90
Dec2014 $1.85
Dec2013 $1.63
Dec2012 $1.35
Dec2011 $1.20
Dec2010 $1.34
Dec2009 $1.58
Dec2008 $2.07
Dec2007 $2.05
Dec2006 $1.60
Dec2005 $1.05
Dec2004 $1.01
Dec2003 $0.97
Dec2002 $1.00

Recommended Reading:

Other ModernGraham posts about the company

HCP Inc Valuation – March 2018 $HCP
HCP Inc Valuation – January 2016 Update $HCP
13 Best Stocks For Value Investors This Week – 10/17/15
HCP Inc. Valuation – October 2015 Update $HCP
18 Companies in the Spotlight This Week – 10/25/14

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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.

Apartment Investment and Management Co Valuation – January 2019 $AIV

Company Profile (excerpt from Reuters): Apartment Investment and Management Company (Aimco), incorporated on January 10, 1994, is a self-administered and self-managed real estate investment trust (REIT). Aimco, through its subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, holds the ownership interests in the Aimco Operating Partnership. The Company operates through two segments: conventional real estate and affordable real estate. As of July 25, 2018, its real estate portfolio consisted of 134 apartment communities with 37,228 apartment homes. Aimco Operating Partnership conducts the Company’s 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.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AIV – January 2019

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 $7,313,721,219 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.43 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 -385.71% Fail
6. Moderate PEmg Ratio PEmg < 20 17.71 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.36 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 0.43 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -26.33 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 $2.65
MG Growth Estimate 15.00%
MG Value $102.15
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $38.47
MG Value based on 0% Growth $22.55
Market Implied Growth Rate 4.60%
Current Price $46.99
% of Intrinsic Value 46.00%

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 or growth over the last ten years, and the high PB ratio. 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 $1 in 2014 to an estimated $2.65 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 4.6% 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 Apartment Investment and Management Co revealed the company was trading above its Graham Number of $28.81. The company pays a dividend of $1.44 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 17.71, which was below the industry average of 70.5, 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 $-24.77.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$24.77
Graham Number $28.81
PEmg 17.71
Current Ratio 0.43
PB Ratio 3.36
Current Dividend $1.44
Dividend Yield 3.06%
Number of Consecutive Years of Dividend Growth 7

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 9/1/2018
Total Current Assets $104,299,000
Total Current Liabilities $242,782,000
Long-Term Debt $3,646,789,000
Total Assets $6,185,021,000
Intangible Assets $37,808,000
Total Liabilities $3,990,891,000
Shares Outstanding (Diluted Average) 156,938,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.77
Dec2017 $1.96
Dec2016 $2.67
Dec2015 $1.52
Dec2014 $2.06
Dec2013 $1.40
Dec2012 $0.61
Dec2011 -$0.86
Dec2010 -$1.08
Dec2009 -$1.00
Dec2008 $3.96
Dec2007 -$0.26
Dec2006 $0.95
Dec2005 -$0.12
Dec2004 $1.28
Dec2003 $0.67
Dec2002 $0.87
Dec2001 $0.23
Dec2000 $0.52
Dec1999 $0.38
Dec1998 $0.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.65
Dec2017 $2.04
Dec2016 $1.93
Dec2015 $1.36
Dec2014 $1.00
Dec2013 $0.25
Dec2012 -$0.11
Dec2011 -$0.26
Dec2010 $0.19
Dec2009 $0.79
Dec2008 $1.51
Dec2007 $0.36
Dec2006 $0.69
Dec2005 $0.57
Dec2004 $0.84
Dec2003 $0.60
Dec2002 $0.56

Recommended Reading:

Other ModernGraham posts about the company

Apartment Investment & Management Co Valuation – March 2018 $AIV
Apartment Investment & Management Co Valuation – July 2016 $AIV
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

Simon Property Group Inc Valuation – January 2019 $SPG
Crown Castle International Corp Valuation – January 2019 $CCI
Welltower Inc Valuation – January 2019 $WELL
Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB
Weyerhaeuser Co Valuation – December 2018 $WY
Alexandria Real Estate Equities Inc Valuation – November 2018 $ARE
LaSalle Hotel Properties Valuation – September 2018 $LHO
Cousins Properties Inc Valuation – September 2018 $CUZ
Cominar Real Estate Investment Trust Valuation – September 2018 $TSE:CUF.UN

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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