Equinix Inc Valuation – March 2019 #EQIX

Company Profile (excerpt from Reuters): Equinix, Inc. (Equinix), incorporated on June 22, 1998, operates as a real estate investment trust (REIT). The Company connects various companies directly to their customers and partners inside interconnected data centers. The Company operates through three segments: Americas, EMEA and Asia-Pacific. The Company’s platform Equinix, combines a global footprint of International Business Exchange (IBX) data centers, a range of interconnection solutions, ecosystems and support. Its customers include carriers, mobile and other bandwidth providers, cloud and information technology (IT) services providers, content providers, financial companies and enterprises. It provides each customer access to a choice of business partners and solutions based on their colocation, interconnection and managed IT service needs. Its colocation offerings include operations space, storage space, cabinets and power for customers’ colocation needs inside Equinix’s IBX data centers. Its interconnection offerings include Equinix Cloud Exchange, which enables simultaneous, direct and secure connections to multiple clouds from a single port; Equinix Performance Hub, which takes enterprise IT inside any one of its global data centers, and Equinix Data Hub, which enables secure, compliant access to business-critical data and analytics wherever users are located around the globe.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EQIX – March 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 $37,512,444,147 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.00 Fail
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 138.03% Pass
6. Moderate PEmg Ratio PEmg < 20 111.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.05 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 1.00 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 15,449.18 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 $4.03
MG Growth Estimate 15.00%
MG Value $154.98
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $58.37
MG Value based on 0% Growth $34.22
Market Implied Growth Rate 51.67%
Current Price $450.19
% of Intrinsic Value 290.49%

Equinix 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 over the last ten years, and the poor dividend history, 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 Overvalued after growing its EPSmg (normalized earnings) from $0.62 in 2015 to an estimated $4.03 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 51.67% 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 Equinix Inc revealed the company was trading above its Graham Number of $103.19. The company pays a dividend of $9.12 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 111.84, which was above the industry average of 61.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-142.24.

Equinix 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) -$142.24
Graham Number $103.19
PEmg 111.84
Current Ratio 1.00
PB Ratio 5.05
Current Dividend $9.12
Dividend Yield 2.03%
Number of Consecutive Years of Dividend Growth 4

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 12/1/2018
Total Current Assets $1,515,682,000
Total Current Liabilities $1,515,071,000
Long-Term Debt $9,439,448,000
Total Assets $20,244,638,000
Intangible Assets $7,169,684,000
Total Liabilities $13,025,359,000
Shares Outstanding (Diluted Average) 80,920,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.27
Dec2018 $4.56
Dec2017 $3.00
Dec2016 $1.79
Dec2015 $3.21
Dec2014 -$4.96
Dec2013 $1.89
Dec2012 $2.83
Dec2011 $1.74
Dec2010 $0.82
Dec2009 $1.75
Dec2008 $2.79
Dec2007 -$0.16
Dec2006 -$0.22
Dec2005 -$1.78
Dec2004 -$3.87
Dec2003 -$8.76
Dec2002 -$7.23
Dec2001 -$76.62
Dec2000 -$111.18
Dec1999 -$159.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.03
Dec2018 $2.78
Dec2017 $1.58
Dec2016 $0.90
Dec2015 $0.62
Dec2014 -$0.30
Dec2013 $1.96
Dec2012 $1.99
Dec2011 $1.51
Dec2010 $1.26
Dec2009 $1.15
Dec2008 $0.35
Dec2007 -$1.57
Dec2006 -$2.97
Dec2005 -$9.45
Dec2004 -$22.70
Dec2003 -$45.60

Recommended Reading:

Other ModernGraham posts about the company

Equinix Inc Valuation – June 2018 $EQIX
Equinix Inc Valuation – July 2017 $EQIX
5 of the Worst Stocks to Invest In – December 2016
Equinix Inc Valuation – August 2016 $EQIX
Equinix Inc. Analysis – Initial Coverage $EQIX

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Kimco Realty Corp Valuation – March 2019 #KIM
Essex Property Trust Inc Valuation – March 2019 #ESS
Federal Realty Investment Trust Valuation – March 2019 #FRT
UDR Inc Valuation – March 2019 #UDR
Mid-America Apartment Communities Inc Valuation – March 2019 #MAA
Extra Space Storage Inc Valuation – March 2019 #EXR
Digital Realty Trust Inc Valuation – March 2019 #DLR
Equity Residential Valuation – March 2019 #EQR
Prologis Inc Valuation – March 2019 #PLD
Duke Realty Corp Valuation – March 2019 $DRE

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.

Equinix Inc Valuation – June 2018 $EQIX

Company Profile (excerpt from Reuters): Equinix, Inc. (Equinix), incorporated on June 22, 1998, operates as a real estate investment trust (REIT). The Company connects various companies directly to their customers and partners inside interconnected data centers. The Company operates through three segments: Americas, EMEA and Asia-Pacific. The Company’s platform Equinix, combines a global footprint of International Business Exchange (IBX) data centers, a range of interconnection solutions, ecosystems and support. Its customers include carriers, mobile and other bandwidth providers, cloud and information technology (IT) services providers, content providers, financial companies and enterprises. It provides each customer access to a choice of business partners and solutions based on their colocation, interconnection and managed IT service needs. Its colocation offerings include operations space, storage space, cabinets and power for customers’ colocation needs inside Equinix’s IBX data centers. Its interconnection offerings include Equinix Cloud Exchange, which enables simultaneous, direct and secure connections to multiple clouds from a single port; Equinix Performance Hub, which takes enterprise IT inside any one of its global data centers, and Equinix Data Hub, which enables secure, compliant access to business-critical data and analytics wherever users are located around the globe.

EQIX Chart

EQIX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EQIX – June 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 $33,281,682,400 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.36 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 79.58% Pass
6. Moderate PEmg Ratio PEmg < 20 186.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.67 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 2.36 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.49 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 Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.24
MG Growth Estimate 15.00%
MG Value $86.19
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $32.46
MG Value based on 0% Growth $19.03
Market Implied Growth Rate 89.24%
Current Price $418.57
% of Intrinsic Value 485.64%

Equinix Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $-0.3 in 2014 to an estimated $2.24 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 89.24% 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 Equinix Inc revealed the company was trading above its Graham Number of $75.84. The company pays a dividend of $8 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 186.97, which was above the industry average of 49.08. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-123.77.

Equinix Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$123.77
Graham Number $75.84
PEmg 186.97
Current Ratio 2.36
PB Ratio 4.67
Current Dividend $8.00
Dividend Yield 1.91%
Number of Consecutive Years of Dividend Growth 3

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 3/1/2018
Total Current Assets $2,943,484,000
Total Current Liabilities $1,246,475,000
Long-Term Debt $9,317,149,000
Total Assets $19,941,928,000
Intangible Assets $6,841,763,000
Total Liabilities $12,801,377,000
Shares Outstanding (Diluted Average) 79,649,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.95
Dec2017 $3.00
Dec2016 $1.79
Dec2015 $3.21
Dec2014 -$4.96
Dec2013 $1.89
Dec2012 $2.83
Dec2011 $1.74
Dec2010 $0.82
Dec2009 $1.75
Dec2008 $2.79
Dec2007 -$0.16
Dec2006 -$0.22
Dec2005 -$1.78
Dec2004 -$3.87
Dec2003 -$8.76
Dec2002 -$7.23
Dec2001 -$76.62
Dec2000 -$111.18
Dec1999 -$159.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.24
Dec2017 $1.58
Dec2016 $0.90
Dec2015 $0.62
Dec2014 -$0.30
Dec2013 $1.96
Dec2012 $1.99
Dec2011 $1.51
Dec2010 $1.26
Dec2009 $1.15
Dec2008 $0.35
Dec2007 -$1.57
Dec2006 -$2.97
Dec2005 -$9.45
Dec2004 -$22.70
Dec2003 -$45.60
Dec2002 -$66.29

Recommended Reading:

Other ModernGraham posts about the company

Equinix Inc Valuation – July 2017 $EQIX
5 of the Worst Stocks to Invest In – December 2016
Equinix Inc Valuation – August 2016 $EQIX
Equinix Inc. Analysis – Initial Coverage $EQIX

Other ModernGraham posts about related companies

Essex Property Trust Inc Valuation – June 2018 $ESS
Federal Realty Investment Trust Valuation – June 2018 $FRT
UDR Inc Valuation – June 2018 $UDR
Mid-America Apartment Communities Inc Valuation – June 2018 $MAA
Extra Space Storage Inc Valuation – June 2018 $EXR
Digital Realty Trust Inc Valuation – June 2018 $DLR
Equity Residential Valuation – June 2018 $EQR
Prologis Inc Valuation – May 2018 $PLD
Duke Realty Corp Valuation – Initial Coverage $DRE
Realty Income Corp Valuation – April 2018 $O

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.

Equinix Inc Valuation – July 2017 $EQIX

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 Equinix Inc (EQIX) fares in the ModernGraham valuation model.

EQIX Chart

EQIX data by YCharts

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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. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of EQIX – July 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 $34,102,032,100 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.46 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 87.31% Pass
6. Moderate PEmg Ratio PEmg < 20 191.96 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.89 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 5.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.64 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 Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.26
MG Growth Estimate 2.34%
MG Value $29.83
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $32.83
MG Value based on 0% Growth $19.24
Market Implied Growth Rate 91.73%
Current Price $434.60
% of Intrinsic Value 1456.83%

Equinix, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the  insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $1.96 in 2013 to an estimated $2.26 for 2017.  This level of demonstrated earnings growth does not support the market’s implied estimate of 91.73% 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 Equinix, Inc. revealed the company was trading above its Graham Number of $83.26.  The company pays a dividend of $7 per share, for a yield of 1.6%  Its PEmg (price over earnings per share – ModernGraham) was 191.96, which was above the industry average of 34.38.  Finally, the company was trading above its Net Current Asset Value (NCAV) of $-69.42.

Equinix, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$69.42
Graham Number $83.26
PEmg 191.96
Current Ratio 5.46
PB Ratio 4.89
Current Dividend $7.00
Dividend Yield 1.61%
Number of Consecutive Years of Dividend Growth 2

[/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 3/1/2017
Total Current Assets $5,574,017,000
Total Current Liabilities $1,020,068,000
Long-Term Debt $7,478,059,000
Total Assets $17,184,684,000
Intangible Assets $3,763,732,000
Total Liabilities $10,666,845,000
Shares Outstanding (Diluted Average) 73,367,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.04
Dec2016 $1.79
Dec2015 $3.21
Dec2014 -$4.96
Dec2013 $1.89
Dec2012 $2.83
Dec2011 $1.74
Dec2010 $0.82
Dec2009 $1.75
Dec2008 $2.79
Dec2007 -$0.16
Dec2006 -$0.22
Dec2005 -$1.78
Dec2004 -$3.87
Dec2003 -$8.76
Dec2002 -$7.23
Dec2001 -$76.62
Dec2000 -$111.18
Dec1999 -$159.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.26
Dec2016 $0.90
Dec2015 $0.62
Dec2014 -$0.30
Dec2013 $1.96
Dec2012 $1.99
Dec2011 $1.51
Dec2010 $1.26
Dec2009 $1.15
Dec2008 $0.35
Dec2007 -$1.57
Dec2006 -$2.97
Dec2005 -$9.45
Dec2004 -$22.70
Dec2003 -$45.60
Dec2002 -$66.29
Dec2001 -$87.01

Recommended Reading:

Other ModernGraham posts about the company

Equinix Inc. Analysis – Initial Coverage $EQIX

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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.

Equinix Inc Valuation – August 2016 $EQIX

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 – August 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 Equinix Inc (EQIX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Equinix, Inc. is engaged in connecting companies to their customers and partners inside the interconnected data centers. The Company operates in three segments: Americas; Europe, the Middle East and Africa, and Asia-Pacific. The Company’s platform Equinix combines a footprint of International Business Exchange (IBX) data centers, interconnection opportunities and ecosystems. It offers colocation, interconnection solutions, and managed Information Technology infrastructure and professional services. Its Colocation offerings include cabinets, power and IBXflex. Its Interconnection offerings include Physical Cross Connect/Direct Interconnections, Equinix Internet Exchange, Equinix Metro Connect, Internet Connectivity Services, Equinix Cloud Exchange and Equinix Performance Hub. Its Equinix Professional Services include Cloud Consulting Services, Global Solutions Architects, Solution Validation Centers, Smart Hands Services, Equinix Customer Portal and Business Continuity Trading Rooms.

EQIX Chart

EQIX data by YCharts

[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. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, 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 EQIX – August 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 $25,925,869,962 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.34 Fail
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 31.51% Fail
6. Moderate PEmg Ratio PEmg < 20 129.62 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 5.44 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 1.34 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 9.12 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 Pass

Stage 2: Determination of Intrinsic Value

EQIX value chart August 2016

EPSmg $2.81
MG Growth Estimate 6.16%
MG Value $58.46
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $40.72
MG Value based on 0% Growth $23.87
Market Implied Growth Rate 60.56%
Current Price $363.98
% of Intrinsic Value 622.66%

Equinix 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, the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $1.99 in 2012 to an estimated $2.81 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 60.56% 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 Equinix Inc revealed the company was trading above its Graham Number of $105.77. The company pays a dividend of $6.88 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 129.62, which was above the industry average of 35.13. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-91.92.

Equinix Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

EQIX charts August 2016

Net Current Asset Value (NCAV) -$91.92
Graham Number $105.77
PEmg 129.62
Current Ratio 1.34
PB Ratio 5.44
Current Dividend $6.88
Dividend Yield 1.89%
Number of Consecutive Years of Dividend Growth 2

[/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 6/1/2016
Total Current Assets $2,095,429,000
Total Current Liabilities $1,559,779,000
Long-Term Debt $4,882,479,000
Total Assets $13,269,045,000
Intangible Assets $3,979,152,000
Total Liabilities $8,563,580,000
Shares Outstanding (Diluted Average) 70,364,000

Earnings Per Share History

Next Fiscal Year Estimate $7.51
Dec2015 $3.21
Dec2014 -$4.96
Dec2013 $1.89
Dec2012 $2.83
Dec2011 $1.74
Dec2010 $0.82
Dec2009 $1.75
Dec2008 $2.79
Dec2007 -$0.16
Dec2006 -$0.22
Dec2005 -$1.78
Dec2004 -$3.87
Dec2003 -$8.76
Dec2002 -$7.23
Dec2001 -$76.62
Dec2000 -$111.06
Dec1999 -$159.11

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.81
Dec2015 $0.62
Dec2014 -$0.30
Dec2013 $1.96
Dec2012 $1.99
Dec2011 $1.51
Dec2010 $1.26
Dec2009 $1.15
Dec2008 $0.35
Dec2007 -$1.57
Dec2006 -$2.97
Dec2005 -$9.45
Dec2004 -$22.69
Dec2003 -$45.59
Dec2002 -$66.27
Dec2001 -$86.98
Dec2000 -$79.45

Recommended Reading:

Other ModernGraham posts about the company

Equinix Inc. Analysis – Initial Coverage $EQIX

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Cognizant Technology Solutions Corp Valuation – July 2016 $CTSH
Total System Services Inc Valuation – May 2016 $TSS
Qualcomm Inc Valuation – February 2016 $QCOM

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.

Equinix Inc. Analysis – Initial Coverage $EQIX

220px-Equinix.svgBenjamin 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 5 Most Undervalued Companies for the Defensive Investor – June 2015.  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 Equinix Inc. (EQIX) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Equinix, Inc. is a networking company. The Company provides data center offerings primarily consisting of colocation, interconnection solutions and managed IT infrastructure services. The Company’s colocation offerings include Cabinets, Power and IBXflex. Cabinets allows customer for colocating networking, server and storage equipment. Power is an element of increasing importance in customers’ colocation decisions. IBXflex allows customers to deploy mission-critical operations personnel and equipment on-site at its IBX data centers. The Company’s interconnection solutions enable scalable, reliable and cost-effective interconnection and traffic exchange between Equinix customers. The Company offers managed IT infrastructure services, such as Equinix Professional Services, which offers practical guidance and proven solutions to help customers optimize and future-proof the data center architectures.

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Defensive Investor – must pass at least 6 of the following 7 tests: Score = 3/7

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Sufficiently Strong Financial Condition – current ratio greater than 2 – PASS
  3. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  4. Dividend Record – has paid a dividend for at least 10 straight years – FAIL
  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 – FAIL

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 – PASS
  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 – FAIL
  4. Dividend Record – currently pays a dividend – PASS
  5. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $262.46
MG Value $163.39
MG Opinion Overvalued
Value Based on 3% Growth $61.54
Value Based on 0% Growth $36.07
Market Implied Growth Rate 26.67%
Net Current Asset Value (NCAV) -$72.13
PEmg 61.84
Current Ratio 2.16
PB Ratio 6.94

Balance Sheet – March 2015

Current Assets $1,440,000,000
Current Liabilities $666,000,000
Total Debt $4,588,000,000
Total Assets $7,728,000,000
Intangible Assets $1,120,000,000
Total Liabilities $5,566,000,000
Outstanding Shares 57,200,000

Earnings Per Share

2015 (estimate) $14.09
2014 -$4.96
2013 $1.89
2012 $2.83
2011 $1.72
2010 $0.82
2009 $1.75
2008 $2.79
2007 -$0.16
2006 -$0.22
2005 -$1.78

Earnings Per Share – ModernGraham

2015 (estimate) $4.24
2014 -$0.30
2013 $1.95
2012 $1.99
2011 $1.50
2010 $1.26

Dividend History

Conclusion:

Equinix Inc. does not qualify for either the Defensive Investor and the Enterprising Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, the short dividend history, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the level of debt relative to the net current assets and the lack of earnings stability over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities or proceed with a speculative attitude.  As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.50 in 2011 to an estimated $4.24 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 26.67% 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 falling below the 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 Equinix Inc. (EQIX)?  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 any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Senior Housing Properties Trust Valuation – August 2018 $SNH

Company Profile (excerpt from Reuters): Senior Housing Properties Trust, incorporated on December 16, 1998, is a real estate investment trust (REIT). The Company’s segments include triple net senior living communities that provide short term and long term residential care and other services for residents; managed senior living communities that provide short term and long term residential care and other services for residents; properties leased to medical providers, medical related businesses, clinics and biotech laboratory tenants (MOBs), and all other, including certain properties that offer wellness, fitness and spa services to members.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SNH – August 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 $4,288,838,109 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.52 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 -37.59% Fail
6. Moderate PEmg Ratio PEmg < 20 30.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 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 1.52 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 155.04 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 $0.59
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $8.55
MG Value based on 0% Growth $5.01
Market Implied Growth Rate 11.17%
Current Price $18.18
% of Intrinsic Value N/A

Senior Housing Properties Trust 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 growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net 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 $0.84 in 2014 to an estimated $0.59 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 11.17% 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 Senior Housing Properties Trust revealed the company was trading above its Graham Number of $12.6. The company pays a dividend of $1.56 per share, for a yield of 8.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 30.85, which was below the industry average of 47.15, 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 $-16.48.

Senior Housing Properties Trust 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) -$16.48
Graham Number $12.60
PEmg 30.85
Current Ratio 1.52
PB Ratio 1.26
Current Dividend $1.56
Dividend Yield 8.58%
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 3/1/2018
Total Current Assets $53,241,000
Total Current Liabilities $35,075,000
Long-Term Debt $2,816,477,000
Total Assets $7,384,064,000
Intangible Assets $490,505,000
Total Liabilities $3,967,947,000
Shares Outstanding (Diluted Average) 237,493,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.54
Dec2017 $0.62
Dec2016 $0.60
Dec2015 $0.53
Dec2014 $0.80
Dec2013 $0.81
Dec2012 $0.80
Dec2011 $1.01
Dec2010 $0.91
Dec2009 $0.90
Dec2008 $1.01
Dec2007 $1.03
Dec2006 $0.91
Dec2005 $0.93
Dec2004 $0.89
Dec2003 $0.78
Dec2002 $0.89
Dec2001 $0.55
Dec2000 $2.25
Dec1999 $0.57
Dec1998 $1.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.59
Dec2017 $0.63
Dec2016 $0.66
Dec2015 $0.73
Dec2014 $0.84
Dec2013 $0.87
Dec2012 $0.91
Dec2011 $0.96
Dec2010 $0.94
Dec2009 $0.96
Dec2008 $0.98
Dec2007 $0.94
Dec2006 $0.89
Dec2005 $0.86
Dec2004 $0.91
Dec2003 $0.95
Dec2002 $1.09

Recommended Reading:

Other ModernGraham posts about the company

Senior Housing Properties Trust Valuation – Initial Coverage $SNH

Other ModernGraham posts about related companies

Tanger Factory Outlet Centers Inc Valuation – July 2018 $SKT
Capstead Mortgage Corp Valuation – July 2018 $CMO
Mack-Cali Realty Corp Valuation – July 2018 $CLI
Chesapeake Lodging Trust Valuation – July 2018 $CHSP
Alexander & Baldwin Inc Valuation – July 2018 $ALEX
Summit Hotel Properties Inc Valuation – July 2018 $INN
Sabra Health Care REIT Inc Valuation – July 2018 $SBRA
National Retail Properties Inc Valuation – July 2018 $NNN
Equinix Inc Valuation – June 2018 $EQIX
Kimco Realty Corp Valuation – June 2018 $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.

CoreSite Realty Corp Valuation – August 2018 $COR

Company Profile (excerpt from Reuters): CoreSite Realty Corporation (CoreSite), incorporated on February 17, 2010, is an integrated, self-administered and self-managed real estate investment trust (REIT). The Company, through its controlling interest in CoreSite, L.P., is engaged in the business of ownership, acquisition, construction and operation of data centers across a range of markets in the United States, including the Northern Virginia (including Washington District of Columbia), New York and San Francisco Bay areas, Chicago, Los Angeles, Boston, Miami and Denver. The enterprises, network operators, cloud providers and supporting service providers choose CoreSite to connect and protect their data, applications and computing workloads. As of December 31, 2016, the Company had delivered data center and interconnection solutions to customer ecosystem across eight North American markets. In addition to geographic markets, the Company groups its customers into various industry verticals, including enterprises; cloud and information technology (IT) service providers, and networks and mobility.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COR – August 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 $5,500,648,213 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.28 Fail
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 -1434.15% Fail
6. Moderate PEmg Ratio PEmg < 20 68.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.17 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 0.28 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.64 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 $1.68
MG Growth Estimate 15.00%
MG Value $64.55
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $24.31
MG Value based on 0% Growth $14.25
Market Implied Growth Rate 29.84%
Current Price $114.30
% of Intrinsic Value 177.07%

CoreSite Realty Corp 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 poor dividend history, 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 Overvalued after growing its EPSmg (normalized earnings) from $0.35 in 2014 to an estimated $1.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 29.84% 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 CoreSite Realty Corp revealed the company was trading above its Graham Number of $19.65. The company pays a dividend of $3.58 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 68.17, which was above the industry average of 47.15. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-39.39.

CoreSite Realty Corp 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) -$39.39
Graham Number $19.65
PEmg 68.17
Current Ratio 0.28
PB Ratio 10.17
Current Dividend $3.58
Dividend Yield 3.13%
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 6/1/2018
Total Current Assets $34,643,000
Total Current Liabilities $123,164,000
Long-Term Debt $1,030,536,000
Total Assets $1,767,098,000
Intangible Assets $66,570,000
Total Liabilities $1,382,498,000
Shares Outstanding (Diluted Average) 34,220,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.09
Dec2017 $1.84
Dec2016 $1.54
Dec2015 $1.03
Dec2014 $0.66
Dec2013 $0.49
Dec2012 $0.22
Dec2011 -$0.24
Dec2010 -$0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.68
Dec2017 $1.35
Dec2016 $1.00
Dec2015 $0.63
Dec2014 $0.35
Dec2013 $0.15
Dec2012 -$0.02
Dec2011 -$0.13
Dec2010 -$0.06

Recommended Reading:

Other ModernGraham posts about the company

CoreSite Realty Corp Valuation – Initial Coverage $COR

Other ModernGraham posts about related companies

Tanger Factory Outlet Centers Inc Valuation – July 2018 $SKT
Capstead Mortgage Corp Valuation – July 2018 $CMO
Mack-Cali Realty Corp Valuation – July 2018 $CLI
Chesapeake Lodging Trust Valuation – July 2018 $CHSP
Alexander & Baldwin Inc Valuation – July 2018 $ALEX
Summit Hotel Properties Inc Valuation – July 2018 $INN
Sabra Health Care REIT Inc Valuation – July 2018 $SBRA
National Retail Properties Inc Valuation – July 2018 $NNN
Equinix Inc Valuation – June 2018 $EQIX
Kimco Realty Corp Valuation – June 2018 $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.

Tanger Factory Outlet Centers Inc Valuation – July 2018 $SKT

Company Profile (excerpt from Reuters): Tanger Factory Outlet Centers, Inc., incorporated on March 3, 1993, is an owner and operator of outlet centers in the United States and Canada. The Company is a fully-integrated, self-administered and self-managed real estate investment trust (REIT), which focuses on developing, acquiring, owning, operating and managing outlet shopping centers. As of December 31, 2016, its portfolio consisted of 36 outlet centers, with a total gross leasable area of approximately 12.7 million square feet, which were 98% occupied and contained over 2,600 stores representing approximately 400 store brands. Its outlet centers and other assets are held by, and all of its operations are conducted by, Tanger Properties Limited Partnership and subsidiaries (Operating Partnership).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SKT – July 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 $2,274,582,107 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.46 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 135.26% Pass
6. Moderate PEmg Ratio PEmg < 20 18.86 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.73 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 3.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 10.86 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 $1.25
MG Growth Estimate 9.64%
MG Value $34.79
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $18.16
MG Value based on 0% Growth $10.65
Market Implied Growth Rate 5.18%
Current Price $23.62
% of Intrinsic Value 67.89%

Tanger Factory Outlet Centers Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value 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 $0.76 in 2014 to an estimated $1.25 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.18% 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 Tanger Factory Outlet Centers Inc. revealed the company was trading above its Graham Number of $11.47. The company pays a dividend of $1.35 per share, for a yield of 5.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 18.86, which was below the industry average of 49.54, 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 $-17.97.

Tanger Factory Outlet Centers Inc. fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.97
Graham Number $11.47
PEmg 18.86
Current Ratio 3.46
PB Ratio 3.73
Current Dividend $1.35
Dividend Yield 5.73%
Number of Consecutive Years of Dividend Growth 20

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 3/1/2018
Total Current Assets $229,589,000
Total Current Liabilities $66,405,000
Long-Term Debt $1,772,055,000
Total Assets $2,505,858,000
Intangible Assets $0
Total Liabilities $1,912,367,000
Shares Outstanding (Diluted Average) 93,644,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.95
Dec2017 $0.71
Dec2016 $2.01
Dec2015 $2.20
Dec2014 $0.77
Dec2013 $1.13
Dec2012 $0.57
Dec2011 $0.52
Dec2010 $0.32
Dec2009 $0.72
Dec2008 $0.31
Dec2007 $0.36
Dec2006 $0.52
Dec2005 $0.08
Dec2004 $0.13
Dec2003 $0.30
Dec2002 $0.27
Dec2001 $0.17
Dec2000 $0.08
Dec1999 $0.44
Dec1998 $0.31

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.25
Dec2017 $1.39
Dec2016 $1.60
Dec2015 $1.28
Dec2014 $0.76
Dec2013 $0.72
Dec2012 $0.51
Dec2011 $0.47
Dec2010 $0.44
Dec2009 $0.47
Dec2008 $0.32
Dec2007 $0.31
Dec2006 $0.28
Dec2005 $0.17
Dec2004 $0.20
Dec2003 $0.24
Dec2002 $0.23

Recommended Reading:

Other ModernGraham posts about the company

Tanger Factory Outlet Centers Inc Valuation – Initial Coverage $SKT

Other ModernGraham posts about related companies

Mack-Cali Realty Corp Valuation – July 2018 $CLI
Chesapeake Lodging Trust Valuation – July 2018 $CHSP
Alexander & Baldwin Inc Valuation – July 2018 $ALEX
Summit Hotel Properties Inc Valuation – July 2018 $INN
Sabra Health Care REIT Inc Valuation – July 2018 $SBRA
National Retail Properties Inc Valuation – July 2018 $NNN
Equinix Inc Valuation – June 2018 $EQIX
Kimco Realty Corp Valuation – June 2018 $KIM
Essex Property Trust Inc Valuation – June 2018 $ESS
Federal Realty Investment Trust Valuation – June 2018 $FRT

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.

Capstead Mortgage Corp Valuation – July 2018 $CMO

Company Profile (excerpt from Reuters): Capstead Mortgage Corporation, incorporated on April 15, 1985, operates as a self-managed real estate investment trust (REIT). The Company manages a leveraged portfolio of residential mortgage pass-through securities consisting of relatively short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or by an agency of the federal government, the Government National Mortgage Association (Ginnie Mae).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CMO – July 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $778,439,067 Fail
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -63.89% Fail
5. Moderate PEmg Ratio PEmg < 20 12.41 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.66 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. 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 C
MG Value based on 3% Growth $9.78
MG Value based on 0% Growth $5.73
Market Implied Growth Rate 1.95%
Current Price $8.37
% of Intrinsic Value N/A

CAPSTEAD Mtg Co/SH does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years. The Enterprising Investor has concerns regarding 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 $1.33 in 2014 to an estimated $0.67 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 1.95% 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.

At the time of valuation, further research into CAPSTEAD Mtg Co/SH revealed the company was trading below its Graham Number of $9.99. The company pays a dividend of $0.8 per share, for a yield of 9.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 12.41, which was below the industry average of 49.54, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

CAPSTEAD Mtg Co/SH receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $9.99
PEmg 12.41
PB Ratio 0.66
Dividend Yield 9.56%
TTM Dividend $0.80
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 6/1/2018
Long-Term Debt & Capital Lease Obligation $12,035,110,000
Total Assets $13,256,355,000
Intangible Assets $0
Total Liabilities $12,087,499,000
Shares Outstanding (Diluted Average) 92,121,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.43
Dec2017 $0.65
Dec2016 $0.70
Dec2015 $0.97
Dec2014 $1.33
Dec2013 $0.93
Dec2012 $1.50
Dec2011 $1.75
Dec2010 $1.52
Dec2009 $1.66
Dec2008 $1.93
Dec2007 $0.19
Dec2006 -$0.87
Dec2005 $1.96
Dec2004 $1.33
Dec2003 $2.60
Dec2002 $4.85
Dec2001 $5.68
Dec2000 -$6.59
Dec1999 $2.42
Dec1998 -$16.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.67
Dec2017 $0.84
Dec2016 $0.98
Dec2015 $1.18
Dec2014 $1.33
Dec2013 $1.37
Dec2012 $1.62
Dec2011 $1.59
Dec2010 $1.30
Dec2009 $1.12
Dec2008 $0.87
Dec2007 $0.57
Dec2006 $1.17
Dec2005 $2.55
Dec2004 $2.42
Dec2003 $2.58
Dec2002 $1.01

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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.

Mack-Cali Realty Corp Valuation – July 2018 $CLI

Company Profile (excerpt from Reuters): Mack-Cali Realty Corporation, incorporated on May 24, 1994, together with its subsidiaries, is a self-administered and self-managed real estate investment trust (REIT). The Company owns and operates a real estate portfolio of Class A office and office/flex properties located in the Northeast. The Company operates in three segments: commercial and other real estate, multi-family real estate and multi-family services. Its commercial and other real estate provides leasing, property management, acquisition, development, construction and tenant-related services for its commercial and other real estate, and multi-family real estate portfolio. Its multi-family services business also provides similar services for third parties. As of December 31, 2016, the Company owned or had interests in 248 properties, consisting of 119 office and 110 flex properties, totaling approximately 26.6 million square feet, leased to approximately 1,600 commercial tenants and 19 multi-family rental properties containing 5,614 residential units, plus developable land (collectively, the Properties). As of December 31, 2016, the Properties are located in six states, in the Northeast, and the District of Columbia.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CLI – July 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 $1,736,979,953 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 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 -37.53% Fail
6. Moderate PEmg Ratio PEmg < 20 172.59 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.14 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 1.12 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 92.21 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 $0.11
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $1.62
MG Value based on 0% Growth $0.95
Market Implied Growth Rate 82.04%
Current Price $19.33
% of Intrinsic Value N/A

Mack Cali Realty Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, 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 $0.31 in 2014 to an estimated $0.11 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 82.04% 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 Mack Cali Realty Corp revealed the company was trading above its Graham Number of $1.72. The company pays a dividend of $0.75 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 172.59, which was above the industry average of 49.54. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.36.

Mack Cali Realty Corp 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) -$28.36
Graham Number $1.72
PEmg 172.59
Current Ratio 1.12
PB Ratio 1.14
Current Dividend $0.75
Dividend Yield 3.88%
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $261,908,000
Total Current Liabilities $233,548,000
Long-Term Debt $2,615,211,000
Total Assets $4,815,606,000
Intangible Assets $100,732,000
Total Liabilities $3,114,695,000
Shares Outstanding (Diluted Average) 100,604,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.01
Dec2017 $0.06
Dec2016 $1.30
Dec2015 -$1.41
Dec2014 $0.32
Dec2013 -$0.17
Dec2012 $0.47
Dec2011 $0.81
Dec2010 $0.67
Dec2009 $0.71
Dec2008 $0.79
Dec2007 $1.61
Dec2006 $2.28
Dec2005 $1.51
Dec2004 $1.65
Dec2003 $2.43
Dec2002 $2.43
Dec2001 $2.32
Dec2000 $3.10
Dec1999 $1.78
Dec1998 $2.07

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.11
Dec2017 $0.12
Dec2016 $0.13
Dec2015 -$0.30
Dec2014 $0.31
Dec2013 $0.37
Dec2012 $0.65
Dec2011 $0.80
Dec2010 $0.94
Dec2009 $1.17
Dec2008 $1.46
Dec2007 $1.83
Dec2006 $1.98
Dec2005 $1.91
Dec2004 $2.20
Dec2003 $2.45
Dec2002 $2.42

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Essex Property Trust Inc Valuation – June 2018 $ESS
Federal Realty Investment Trust Valuation – June 2018 $FRT
UDR Inc Valuation – June 2018 $UDR

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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