Welltower Inc Valuation – November 2016 $HCN

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 Welltower Inc (HCN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Welltower Inc., formerly Health Care REIT, Inc., is a provider of healthcare infrastructure. The Company operates through three segments: triple-net, which includes independent living facilities, independent supportive living facilities (Canada), continuing care retirement communities, assisted living facilities, care homes with and without nursing (United Kingdom), Alzheimer’s/dementia care facilities, long-term/post-acute care facilities and hospitals; seniors housing operating, which includes a range of facility types, including independent living facilities and independent supportive living facilities, assisted living facilities, care homes and Alzheimer’s/dementia care facilities, and outpatient medical, which includes outpatient medical buildings. It invests in seniors housing operators, post-acute providers and health systems to fund real estate and infrastructure. Welltower, a real estate investment trust, owns properties in the United States, Canada and the United Kingdom.

HCN Chart

HCN data by YCharts

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moderngraham-valuation-of-hcn-november-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 $23,043,339,162 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.32 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 5.99% Fail
6. Moderate PEmg Ratio PEmg < 20 35.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.53 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 2.32 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.19 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

hcn-value-chart-november-2016

EPSmg $1.76
MG Growth Estimate 8.67%
MG Value $45.48
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $25.52
MG Value based on 0% Growth $14.96
Market Implied Growth Rate 13.59%
Current Price $62.78
% of Intrinsic Value 138.04%

Welltower Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg 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 $1.12 in 2012 to an estimated $1.76 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.59% 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 Welltower Inc revealed the company was trading above its Graham Number of $43.68. The company pays a dividend of $3.41 per share, for a yield of 5.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 35.67, which was above the industry average of 34.03. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-36.78.

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

Stage 3: Information for Further Research

hcn-charts-november-2016

Net Current Asset Value (NCAV) -$36.78
Graham Number $43.68
PEmg 35.67
Current Ratio 2.32
PB Ratio 1.53
Current Dividend $3.41
Dividend Yield 5.42%
Number of Consecutive Years of Dividend Growth 9

[/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 9/1/2016
Total Current Assets $1,780,491,000
Total Current Liabilities $767,683,000
Long-Term Debt $13,356,518,000
Total Assets $29,856,339,000
Intangible Assets $68,321,000
Total Liabilities $15,066,494,000
Shares Outstanding (Diluted Average) 361,237,000

Earnings Per Share History

Next Fiscal Year Estimate $2.23
Dec2015 $2.34
Dec2014 $1.45
Dec2013 $0.28
Dec2012 $0.98
Dec2011 $0.90
Dec2010 $0.83
Dec2009 $1.49
Dec2008 $2.76
Dec2007 $1.43
Dec2006 $1.31
Dec2005 $1.15
Dec2004 $1.39
Dec2003 $1.60
Dec2002 $1.48
Dec2001 $1.52
Dec2000 $1.91
Dec1999 $2.21
Dec1998 $2.24
Dec1997 $2.12
Dec1996 $2.18

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.76
Dec2015 $1.41
Dec2014 $0.93
Dec2013 $0.74
Dec2012 $1.12
Dec2011 $1.28
Dec2010 $1.50
Dec2009 $1.77
Dec2008 $1.81
Dec2007 $1.35
Dec2006 $1.33
Dec2005 $1.37
Dec2004 $1.52
Dec2003 $1.63
Dec2002 $1.72
Dec2001 $1.90
Dec2000 $2.10

Recommended Reading:

Other ModernGraham posts about the company

Welltower Inc. Valuation – November 2015 Update $HCN
Health Care REIT Inc. Analysis – August 2015 Update $HCN
47 Companies in the Spotlight This Week – 5/16/15
Health Care REIT Inc. Quarterly Valuation – May 2015 $HCN
15 Companies in the Spotlight This Week – 5/3/2014

Other ModernGraham posts about related companies

SL Green Realty Corp Valuation – August 2016 $SLG
Starwood Property Trust Inc Valuation – August 2016 $STWD
Kimco Realty Corp Valuation – August 2016 $KIM
Equity Residential Valuation – August 2016 $EQR
Host Hotels and Resorts Inc Valuation – July 2016 $HST
Iron Mountain Inc Valuation – July 2016 $IRM
Vornado Realty Trust Valuation – July 2016 $VNO
Public Storage Valuation – July 2016 $PSA
Macerich Co Valuation – July 2016 $MAC
HCP Inc Valuation – July 2016 $HCP

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.

Welltower Inc. Valuation – May 2016 $HCN

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 Welltower Inc. (HCN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Welltower Inc., formerly Health Care REIT, Inc., is a provider of healthcare infrastructure. The Company operates through three segments: triple-net, which includes independent living facilities, independent supportive living facilities (Canada), continuing care retirement communities, assisted living facilities, care homes with and without nursing (United Kingdom), Alzheimer’s/dementia care facilities, long-term/post-acute care facilities and hospitals; seniors housing operating, which includes a range of facility types, including independent living facilities and independent supportive living facilities, assisted living facilities, care homes and Alzheimer’s/dementia care facilities, and outpatient medical, which includes outpatient medical buildings. It invests in seniors housing operators, post-acute providers and health systems to fund real estate and infrastructure. Welltower, a real estate investment trust, owns properties in the United States, Canada and the United Kingdom.

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

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HCN

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 $25,992,919,302 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.31 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 44.44% Pass
6. Moderate PEmg Ratio PEmg < 20 28.41 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.76 Pass
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 2.31 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 15.00 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

HCN value chart May 2016

EPSmg $2.53
MG Growth Estimate 15.00%
MG Value $97.28
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $36.64
MG Value based on 0% Growth $21.48
Market Implied Growth Rate 9.95%
Current Price $71.77
% of Intrinsic Value 73.78%

Welltower Inc qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with 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 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 $1.12 in 2012 to an estimated $2.53 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.95% 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 above the price.

Welltower Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

HCN charts May 2016

Net Current Asset Value (NCAV) -$36.60
Graham Number $13.88
PEmg 28.41
Current Ratio 2.31
PB Ratio 1.76
Current Dividend $3.34
Dividend Yield 4.65%
Number of Consecutive Years of Dividend Growth 9

[/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
Total Current Assets $1,536,278,000
Total Current Liabilities $665,645,000
Long-term Debt $13,063,198,000
Total Assets $29,088,293,000
Intangible Assets $68,321,000
Total Liabilities $14,568,699,000
Shares Outstanding (Diluted Average) 356,051,000

Earnings Per Share History

Next Fiscal Year Estimate $4.53
12/1/2015 $2.34
12/1/2014 $1.45
12/1/2013 $0.28
12/1/2012 $0.98
12/1/2011 $0.90
12/1/2010 $0.83
12/1/2009 $1.49
12/1/2008 $2.81
12/1/2007 $1.46
12/1/2006 $1.31
12/1/2005 $1.15
12/1/2004 $1.39
12/1/2003 $1.60
12/1/2002 $1.48
12/1/2001 $1.52
12/1/2000 $1.91
12/1/1999 $2.21
12/1/1998 $2.24
12/1/1997 $2.12
12/1/1996 $2.18

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.53
12/1/2015 $1.41
12/1/2014 $0.93
12/1/2013 $0.74
12/1/2012 $1.12
12/1/2011 $1.29
12/1/2010 $1.52
12/1/2009 $1.79
12/1/2008 $1.83
12/1/2007 $1.36
12/1/2006 $1.33
12/1/2005 $1.37
12/1/2004 $1.52
12/1/2003 $1.63
12/1/2002 $1.72
12/1/2001 $1.90
12/1/2000 $2.10

Recommended Reading:

Other ModernGraham posts about the company

Welltower Inc. Valuation – November 2015 Update $HCN
Health Care REIT Inc. Analysis – August 2015 Update $HCN
47 Companies in the Spotlight This Week – 5/16/15
Health Care REIT Inc. Quarterly Valuation – May 2015 $HCN
15 Companies in the Spotlight This Week – 5/3/2014

Other ModernGraham posts about related companies

Starwood Property Trust Inc Stock Valuation – February 2016 $STWD
Kimco Realty Corp Stock Valuation – February 2016 $KIM
HCP Inc Valuation – January 2016 Update $HCP
Macerich Co Valuation – January 2016 Update $MAC
Kimco Realty Corp Stock Valuation – February 2016 $KIM
HCP Inc Valuation – January 2016 Update $HCP
Macerich Co Valuation – January 2016 Update $MAC
American Tower Corp Valuation – November 2015 Update $AMT
Weyerhaeuser Co Valuation – November 2015 Update $WY
Boston Properties Inc. Valuation – November 2015 Update $BXP

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.

Welltower Inc. Valuation – November 2015 Update $HCN

REITs 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 Welltower Inc. (HCN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Welltower Inc., formerly Health Care REIT, Inc., is a real estate investment trust (REIT). The Company’s portfolio has range of seniors housing and healthcare real estate, including seniors housing communities, nursing/post-acute facilities, medical office buildings, inpatient and outpatient medical centers and life science facilities. The Company operates in three segments: seniors housing triple-net, seniors housing operating and medical facilities. Its properties consist of land, building, improvements and related rights. The Company’s hospitals and seniors housing triple-net properties are leased to operators under long-term operating leases. Its medical office building portfolio is primarily self-managed and consists principally of multi-tenant properties leased to health care providers.

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

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

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Downloadable PDF version of this valuation:

ModernGraham Valuation of HCN – November 2015

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $20,701,952,037 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.06 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 -13.38% Fail
6. Moderate PEmg Ratio PEmg < 20 35.38 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.41 Pass
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 2.06 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 15.73 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

HCN value Chart November 2015

EPSmg $1.65
MG Growth Estimate 4.30%
MG Value $28.29
Opinion Overvalued
MG Value based on 3% Growth $23.97
MG Value based on 0% Growth $14.05
Market Implied Growth Rate 13.44%
Current Price $58.50
% of Intrinsic Value 206.81%

Welltower Inc. qualifies 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 initially concerned by the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to an estimated $1.65 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 13.44% 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.

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 Welltower Inc. (HCN)?  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.

Stage 3: Information for Further Research

HCN Charts November 2015

Net Current Asset Value (NCAV) -$32.27
Graham Number $51.58
PEmg 35.38
Current Ratio 2.06
PB Ratio 1.41
Dividend Yield 5.59%
Number of Consecutive Years of Dividend Growth 8

 

[/level-mg-stocks-screens-subscriber]

Useful Links:

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

Most Recent Balance Sheet Figures

Total Current Assets $1,415,709,000
Total Current Liabilities $686,651,000
Long-Term Debt $11,467,780,000
Total Assets $27,456,370,000
Intangible Assets $68,321,000
Total Liabilities $12,811,270,000
Shares Outstanding (Diluted Average) 353,107,000

Earnings Per Share History

Next Fiscal Year Estimate $3.06
Dec14 $1.45
Dec13 $0.28
Dec12 $0.98
Dec11 $0.90
Dec10 $0.83
Dec09 $1.49
Dec08 $2.76
Dec07 $1.46
Dec06 $1.31
Dec05 $1.15
Dec04 $1.39
Dec03 $1.60
Dec02 $1.48
Dec01 $1.52
Dec00 $1.91
Dec99 $2.21
Dec98 $2.24
Dec97 $2.12
Dec96 $2.18
Dec95 $1.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.65
Dec14 $0.93
Dec13 $0.74
Dec12 $1.12
Dec11 $1.28
Dec10 $1.51
Dec09 $1.78
Dec08 $1.82
Dec07 $1.36
Dec06 $1.33
Dec05 $1.37
Dec04 $1.52
Dec03 $1.63
Dec02 $1.72
Dec01 $1.90
Dec00 $2.10
Dec99 $2.13

Recommended Reading:

Other ModernGraham posts about the company

Health Care REIT Inc. Analysis – August 2015 Update $HCN
47 Companies in the Spotlight This Week – 5/16/15
Health Care REIT Inc. Quarterly Valuation – May 2015 $HCN
15 Companies in the Spotlight This Week – 5/3/2014
Health Care REIT (HCN) Annual Valuation – 2014

Other ModernGraham posts about related companies

Kimco Realty Corporation Valuation – November 2015 Update $KIM
Prologis Inc. Valuation – October 2015 Update $PLD
HCP Inc. Valuation – October 2015 Update $HCP
Essex Property Trust Inc. Analysis – October 2015 Update $ESS
Macerich Company Analysis – September 2015 Update $MAC
Alexandria Real Estate Equities Inc. Analysis – Initial Coverage $ARE
Weyerhaeuser Company Analysis – August 2015 Update $WY
Boston Properties Inc. Analysis – August 2015 Update $BXP
Health Care REIT Inc. Analysis – August 2015 Update $HCN
Kimco Realty Corporation Analysis – August 2015 Update $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.

Health Care REIT Inc. Analysis – August 2015 Update $HCN

REITs 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 Health Care REIT Inc. (HCN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Health Care REIT, Inc. is a real estate investment trust (REIT). The Company’s portfolio spans the spectrum of seniors housing and health care real estate, including seniors housing communities, post-acute care facilities, medical office buildings, inpatient and outpatient medical centers and life science facilities. It operates through three segments. The Seniors Housing Triple-Net segment’s properties include independent living facilities, independent supportive living facilities (Canada), continuing care retirement communities, assisted living facilities, care homes with and without nursing, Alzheimer’s/dementia facilities, post-acute care facilities and hospitals. The Seniors Housing Operating segment’s properties include independent living facilities and independent supportive living facilities, assisted living facilities, care homes and Alzheimer’s/dementia care facilities. The Medical Facilities segment’s properties include medical office buildings and life science facilities.

[level-free]

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

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

[/level-free]
[level-mg-stocks-screens-subscriber]

Downloadable PDF version of this valuation:

ModernGraham Valuation of HCN – August 2015

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 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 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 Fail
6. Moderate PEmg Ratio PEmg < 20 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 Pass
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 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 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 1.84
MG Growth Estimate 6.45%
MG Value $39.29
Opinion Overvalued
MG Value based on 3% Growth $26.63
MG Value based on 0% Growth $15.61
Market Implied Growth Rate 14.32%
Current Price $68.20
% of Intrinsic Value 173.59%

Health Care REIT Inc. qualifies for the Enterprising Investor but is not suitable for the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth over the last ten years as well as the high PEmg ratio.  The Enterprising Investor is only concerned by the level of debt relative to the net current assets.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to an estimated $1.84 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 14.32% 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.

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 Health Care REIT Inc. (HCN)?  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.

Stage 3: Information for Further Research

HCN charts August 2015

Net Current Asset Value (NCAV) -$32.68
PEmg 37.13
Current Ratio 1.90
PB Ratio 1.63
Dividend Yield 4.75%
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

Total Current Assets $1,239,000,000
Total Current Liabilities $650,437,000
Long-Term Debt $11,552,370,000
Total Assets $27,407,480,000
Intangible Assets $68,321,000
Total Liabilities $12,720,310,000
Outstanding Shares 351,366,000

Earnings Per Share History

Next Fiscal Year Estimate $3.61
Dec14 $1.45
Dec13 $0.28
Dec12 $0.98
Dec11 $0.90
Dec10 $0.83
Dec09 $1.49
Dec08 $2.76
Dec07 $1.46
Dec06 $1.31
Dec05 $1.15
Dec04 $1.39
Dec03 $1.60
Dec02 $1.48
Dec01 $1.52
Dec00 $1.91
Dec99 $2.21
Dec98 $2.24
Dec97 $2.12
Dec96 $2.18
Dec95 $1.16

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.84
Dec14 $0.93
Dec13 $0.74
Dec12 $1.12
Dec11 $1.28
Dec10 $1.51
Dec09 $1.78
Dec08 $1.82
Dec07 $1.36
Dec06 $1.33
Dec05 $1.37
Dec04 $1.52
Dec03 $1.63
Dec02 $1.72
Dec01 $1.90
Dec00 $2.10
Dec99 $2.13

Recommended Reading:

Other ModernGraham posts about the company

47 Companies in the Spotlight This Week – 5/16/15
Health Care REIT Inc. Quarterly Valuation – May 2015 $HCN
15 Companies in the Spotlight This Week – 5/3/2014
Health Care REIT (HCN) Annual Valuation – 2014

Other ModernGraham posts about related companies

Kimco Realty Corporation Analysis – August 2015 Update $KIM
American Campus Communities Inc. Analysis – Initial Coverage $ACC
Ventas Inc. Analysis – 2015 Update $VTR
National Retail Properties Inc. Analysis – Initial Coverage $NNN
SL Green Realty Corp Analysis – Initial Coverage $SLG
Essex Property Trust Inc. Analysis – Initial Coverage $ESS
Equity Residential Analysis – 2015 Update $EQR
Macerich Stock Analysis – May 2015 Quarterly Update $MAC
Iron Mountain Inc. Annual Valuation – 2015 $IRM
Vornado Realty Trust Annual Valuation – 2015 $VNO

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.

[/level-mg-stocks-screens-subscriber]

Health Care REIT Inc. Quarterly Valuation – May 2015 $HCN

health-care-reit_416x416REITs 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 Health Care REIT Inc. (HCN) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Health Care REIT, Inc. is a real estate investment trust (REIT). The Company’s portfolio has range of seniors housing and healthcare real estate, including seniors housing communities, skilled nursing/post-acute facilities, medical office buildings, inpatient and outpatient medical centers and life science facilities. The Company operates in three segments: seniors housing triple-net, seniors housing operating and medical facilities. Its properties consists of land, building, improvements and related rights. The Company’s hospitals and seniors housing triple-net properties are leased to operators under long-term operating leases. Its medical office building portfolio is primarily self-managed and consists principally of multi-tenant properties leased to health care providers.
HCN Chart

HCN data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 5/7

  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 – 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 = 4/5

  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 – 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 $70.12
MG Value $52.10
MG Opinion Overvalued
Value Based on 3% Growth $29.34
Value Based on 0% Growth $17.20
Market Implied Growth Rate 13.08%
Net Current Asset Value (NCAV) -$32.08
PEmg 34.66
Current Ratio 2.05
PB Ratio 1.63

Balance Sheet – March 2015

Current Assets $1,236,000,000
Current Liabilities $604,000,000
Total Debt $11,015,000,000
Total Assets $26,629,000,000
Intangible Assets $68,000,000
Total Liabilities $12,074,000,000
Outstanding Shares 337,800,000

Earnings Per Share

2015 (estimate) $4.17
2014 $1.45
2013 $0.28
2012 $0.98
2011 $0.90
2010 $0.83
2009 $1.49
2008 $2.76
2007 $1.46
2006 $1.31
2005 $1.15

Earnings Per Share – ModernGraham

2015 (estimate) $2.02
2014 $0.93
2013 $0.74
2012 $1.12
2011 $1.28
2010 $1.51

Dividend History
HCN Dividend Chart

HCN Dividend data by YCharts

Conclusion:

Health Care REIT Inc. is suitable for the Enterprising Investor but not for 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 high level of debt relative to the net current assets.  As a result, Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with further research into the company.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from $1.28 in 2011 to only an estimated $2.02 for 2015.  This level of growth does not support the market’s implied estimate of 13.08% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model to return an estimate of intrinsic value falling below the current price.  As a result, the company is considered to be overvalued at this time.

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 Health Care REIT Inc. (HCN)?  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 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.

Health Care REIT (HCN) Annual Valuation – 2014

health-care-reit_416x416REITs 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 Health Care REIT fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Health Care REIT, Inc. is a real estate investment trust (REIT). The Company’s portfolio has range of seniors housing and healthcare real estate, including seniors housing communities, skilled nursing/post-acute facilities, medical office buildings, inpatient and outpatient medical centers and life science facilities. The Company operates in three segments: seniors housing triple-net, seniors housing operating and medical facilities. Its properties primarily consists of land, building, improvements and related rights. The Company’s hospitals and seniors housing triple-net properties are leased to operators under long-term operating leases. Its medical office building portfolio is primarily self-managed and consists principally of multi-tenant properties leased to health care providers. In October 2013, the Company announced the acquisition of the Willows at Hamburg from Health Care REIT, Inc.

HCN Chart

HCN 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 = 2/5

  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 – FAIL

Valuation Summary

Key Data:

Recent Price $62.18
MG Value $0.00
MG Opinion Overvalued
Value Based on 3% Growth $6.21
Value Based on 0% Growth $3.64
Market Implied Growth Rate 68.39%
Net Current Asset Value (NCAV) -$37.59
PEmg 145.28
Current Ratio 1.23
PB Ratio 1.58

Balance Sheet – 12/31/2013

Current Assets $784,900,000
Current Liabilities $640,600,000
Total Debt $10,652,000,000
Total Assets $23,084,000,000
Intangible Assets $1,139,100,000
Total Liabilities $11,669,400,000
Outstanding Shares 289,560,000

Earnings Per Share

2013 $0.10
2012 $0.48
2011 $0.60
2010 $0.49
2009 $1.22
2008 $1.35
2007 $1.26
2006 $1.32
2005 $1.06
2004 $1.38

Earnings Per Share – ModernGraham

2013 $0.43
2012 $0.67
2011 $0.84
2010 $1.01
2009 $1.27
2008 $1.28

Dividend History

HCN Dividend Chart

HCN Dividend data by YCharts

Conclusion:

Health Care REIT does not qualify for either the Defensive Investor or the Enterprising Investor.  For the Defensive Investor, the turn offs are the low current ratio, lack of earnings growth over the last ten years and the high PEmg ratio.  For the Enterprising Investor, the issue is the high level of debt relative to the current assets and the lack of earnings growth over the last five years.  As a result, value investors seeking to follow the ModernGraham approach based on Benjamin Graham’s methods should explore opportunities through a review of 5 Undervalued Companies for the Enterprising Investor and other screens from MG Stocks & Screens.  From a valuation perspective, the company appears to be overvalued after seeing its EPSmg (normalized earnings) drop from $1.27 in 2009 to $0.43 for 2013.  This demonstrated lack of growth does not support the market’s implied estimate of 68.39% earnings growth, and leads the ModernGraham valuation model to return an estimate of intrinsic value that falls well 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 Health Care REIT (HCN)?  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.

If you like our valuations, why not check out ModernGraham Stocks & Screens?  It’s a great way to review the valuations while screening for things like low PE ratio, undervalued companies, etc.!

Disclaimer:  The author did not hold a position in Health Care REIT (HCN) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.

Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Welltower Inc Valuation – March 2018 $WELL

Company Profile (obtained from Marketwatch): Welltower, Inc. is a real estate investment trust. The company invests with seniors housing operators, post acute providers and health systems to fund the real estate infrastructure needed to scale innovative care delivery models and improve people’s wellness and overall health care experience. It owns properties in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities and outpatient medical properties. The company operates through the following segments: Triple-net, Seniors Housing Operating, and Outpatient Medical. The Triple-net properties segment include long-term/post-acute care facilities, assisted living facilities, independent living/continuing care retirement communities, care homes (United Kingdom), independent support living facilities (Canada), care homes with nursing (United Kingdom) and combinations thereof. The Seniors Housing Operating properties segment includes the seniors housing communities. The Outpatient Medical properties segment includes outpatient medical buildings. The company was founded by Bruce G. Thompson and Fritz Wolfe in 1970 and is headquartered in Toledo, OH.

WELL Chart

WELL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of WELL – March 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 $19,577,058,560 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.38 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 64.91% Pass
6. Moderate PEmg Ratio PEmg < 20 30.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.36 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 1.38 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 33.54 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 $1.72
MG Growth Estimate 12.76%
MG Value $58.52
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $24.94
MG Value based on 0% Growth $14.62
Market Implied Growth Rate 11.12%
Current Price $52.86
% of Intrinsic Value 90.33%

Welltower 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.93 in 2014 to an estimated $1.72 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.12% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Welltower Inc revealed the company was trading above its Graham Number of $32.07. The company pays a dividend of $3.48 per share, for a yield of 6.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 30.73, which was below the industry average of 42.02, 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 $-32.93.

Welltower Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$32.93
Graham Number $32.07
PEmg 30.73
Current Ratio 1.38
PB Ratio 1.36
Current Dividend $3.48
Dividend Yield 6.58%
Number of Consecutive Years of Dividend Growth 10

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 $1,259,462,000
Total Current Liabilities $911,863,000
Long-Term Debt $11,659,698,000
Total Assets $27,944,445,000
Intangible Assets $68,321,000
Total Liabilities $13,521,298,000
Shares Outstanding (Diluted Average) 372,322,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.24
Dec2017 $1.26
Dec2016 $2.81
Dec2015 $2.34
Dec2014 $1.45
Dec2013 $0.28
Dec2012 $0.98
Dec2011 $0.90
Dec2010 $0.83
Dec2009 $1.49
Dec2008 $2.76
Dec2007 $1.43
Dec2006 $1.31
Dec2005 $1.15
Dec2004 $1.39
Dec2003 $1.60
Dec2002 $1.48
Dec2001 $1.52
Dec2000 $1.91
Dec1999 $2.21
Dec1998 $2.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.72
Dec2017 $1.85
Dec2016 $1.95
Dec2015 $1.41
Dec2014 $0.93
Dec2013 $0.74
Dec2012 $1.12
Dec2011 $1.28
Dec2010 $1.50
Dec2009 $1.77
Dec2008 $1.81
Dec2007 $1.35
Dec2006 $1.33
Dec2005 $1.37
Dec2004 $1.52
Dec2003 $1.63
Dec2002 $1.72

Recommended Reading:

Other ModernGraham posts about the company

Welltower Inc Valuation – November 2016 $HCN
HCP Inc Valuation – July 2016 $HCP
5 Undervalued Companies with a Low Beta – May 2016
10 Companies Benjamin Graham Would Invest In Today – May 2016
6 Best Stocks For Value Investors This Week – 5/14/16

Other ModernGraham posts about related companies

Boston Properties Inc Valuation – March 2018 $BXP
AvalonBay Communities Inc Valuation – February 2018 $AVB
Weyerhauser Co Valuation – February 2018 $WY
Alexandria Real Estate Equities Inc Valuation – February 2018 $ARE
Education Realty Trust Inc Valuation – Initial Coverage $EDR
American Campus Communities Inc Valuation – September 2017 $ACC
First Industrial Realty Trust Inc Valuation – Initial Coverage $FR
Saul Centers Inc Valuation – Initial Coverage $BFS
Douglas Emmett Inc Valuation – Initial Coverage $DEI
Lexington Realty Trust Valuation – Initial Coverage $LXP

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.

Prologis Inc Valuation – February 2017 $PLD

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 – February 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 Prologis Inc (PLD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Prologis, Inc. is engaged in logistics real estate business, focused on markets across the Americas, Europe and Asia. The Company owns or has investments in, on a basis or through co-investment ventures, properties and development projects in over 20 countries. Its segments include Real Estate Operations and Strategic Capital. It leases distribution facilities to over 5,200 customers across two categories, which include business-to-business and retail/online fulfillment. The Real Estate Operations segment consists of Rental Operations and Capital Deployment. The Strategic Capital segment represents the management of unconsolidated co-investment ventures. For business-to-business enterprises, its buildings serve a range of sectors, including automotive, transportation, pharmaceuticals and general consumer goods. In the area of retail/online fulfillment, its logistics facilities foster the seamless flow of goods around the world.

PLD Chart

PLD 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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[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of PLD – February 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 $26,436,297,594 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.56 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 101.05% Pass
6. Moderate PEmg Ratio PEmg < 20 46.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.85 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 0.56 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -37.90 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 $1.08
MG Growth Estimate 15.00%
MG Value $41.53
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $15.64
MG Value based on 0% Growth $9.17
Market Implied Growth Rate 18.91%
Current Price $49.97
% of Intrinsic Value 120.33%

Prologis 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 high PEmg ratio. 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 $-1.47 in 2012 to an estimated $1.08 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 18.91% 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 Prologis Inc revealed the company was trading above its Graham Number of $24.53. The company pays a dividend of $1.66 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 46.33, which was above the industry average of 31.91. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-28.72.

Prologis 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) -$28.72
Graham Number $24.53
PEmg 46.33
Current Ratio 0.56
PB Ratio 1.85
Current Dividend $1.66
Dividend Yield 3.32%
Number of Consecutive Years of Dividend Growth 3

[/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 9/1/2016
Total Current Assets $375,120,000
Total Current Liabilities $672,111,000
Long-Term Debt $11,256,997,000
Total Assets $30,888,209,000
Intangible Assets $0
Total Liabilities $16,089,042,000
Shares Outstanding (Diluted Average) 547,200,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.96
Dec2015 $1.64
Dec2014 $1.24
Dec2013 $0.64
Dec2012 -$0.18
Dec2011 -$0.51
Dec2010 -$5.90
Dec2009 -$0.37
Dec2008 -$0.68
Dec2007 $2.96
Dec2006 $2.30
Dec2005 $2.85
Dec2004 $1.39
Dec2003 $1.41
Dec2002 $1.33
Dec2001 $1.41
Dec2000 $1.35
Dec1999 $1.94
Dec1998 $1.26
Dec1997 $1.38

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.08
Dec2015 $0.95
Dec2014 $0.09
Dec2013 -$0.75
Dec2012 -$1.47
Dec2011 -$1.71
Dec2010 -$1.65
Dec2009 $0.78
Dec2008 $1.50
Dec2007 $2.45
Dec2006 $2.08
Dec2005 $1.87
Dec2004 $1.38
Dec2003 $1.42
Dec2002 $1.43
Dec2001 $1.48
Dec2000 $1.40

Recommended Reading:

Other ModernGraham posts about the company

Prologis Inc. Valuation – October 2015 Update $PLD
28 Companies in the Spotlight This Week – 11/1/14
Prologis Inc. Annual Valuation – 2014 $PLD

Other ModernGraham posts about related companies

CoreSite Realty Corp Valuation – Initial Coverage $COR
Senior Housing Properties Trust Valuation – Initial Coverage $SNH
Tanger Factory Outlet Centers Inc Valuation – Initial Coverage $SKT
Mack Cali Realty Corp Valuation – Initial Coverage $CLI
Chesapeake Lodging Trust Valuation – December 2016 $CHSP
Summit Hotel Properties Inc Valuation – Initial Coverage $INN
Sabra Health Care REIT Inc Valuation – Initial Coverage $SBRA
National Retail Properties Inc Valuation – November 2016 $NNN
Welltower Inc Valuation – November 2016 $HCN
Realty Income Corp Valuation – November 2016 $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.

Camden Property Trust Valuation – Initial Coverage $CPT

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 – February 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 Camden Property Trust (CPT) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Camden Property Trust is a real estate investment trust (REIT). The Company is engaged in the ownership, management, development, redevelopment, acquisition and construction of multifamily apartment communities. The Company operates in the ownership, management, development, redevelopment, acquisition, and construction of multifamily apartment communities segment. The Company owns interests in, operates, or is developing approximately 180 multifamily properties consisting of approximately 62,650 apartment homes across the United States. Of the over 180 properties, approximately eight properties are under construction. It also owns land holdings. Its properties consist of mid-rise buildings or two and three story buildings in a landscaped setting and provide residents with various amenities common to multifamily rental properties. Its operating properties have over 200 apartment homes. Its properties include Camden Copper Square, Camden Montierra and Camden Ballantyne.

CPT Chart

CPT data by YCharts

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ModernGraham Valuation of CPT – February 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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $7,214,472,682 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
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 1513.58% Pass
5. Moderate PEmg Ratio PEmg < 20 20.23 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.48 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 Pass

Stage 2: Determination of Intrinsic Value

EPSmg $4.07
MG Growth Estimate 12.00%
MG Value $132.41
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $59.06
MG Value based on 0% Growth $34.62
Market Implied Growth Rate 5.87%
Current Price $82.43
% of Intrinsic Value 62.25%

Camden Property Trust is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor has no initial concerns. 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 $2.26 in 2013 to an estimated $4.07 for 2017. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Camden Property Trust revealed the company was trading above its Graham Number of $31.26. The company pays a dividend of $3 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 20.24, which was below the industry average of 31.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

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

Stage 3: Information for Further Research

Graham Number $31.26
PEmg 20.24
PB Ratio 2.48
Dividend Yield 3.64%
TTM Dividend $3.00
Number of Consecutive Years of Dividend Growth 7

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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 12/1/2016
Long-Term Debt & Capital Lease Obligation $2,480,588,000
Total Assets $6,028,152,000
Intangible Assets $0
Total Liabilities $3,013,279,000
Shares Outstanding (Diluted Average) 90,844,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.26
Dec2016 $9.05
Dec2015 $2.76
Dec2014 $3.27
Dec2013 $3.78
Dec2012 $3.30
Dec2011 $0.66
Dec2010 $0.33
Dec2009 -$0.80
Dec2008 $1.28
Dec2007 $2.51
Dec2006 $3.96
Dec2005 $3.58
Dec2004 $0.98
Dec2003 $0.71
Dec2002 $1.73
Dec2001 $1.41
Dec2000 $1.63
Dec1999 $1.23
Dec1998 $1.12
Dec1997 $1.41

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.07
Dec2016 $5.13
Dec2015 $3.03
Dec2014 $2.87
Dec2013 $2.26
Dec2012 $1.32
Dec2011 $0.49
Dec2010 $0.75
Dec2009 $1.34
Dec2008 $2.43
Dec2007 $2.79
Dec2006 $2.68
Dec2005 $1.92
Dec2004 $1.16
Dec2003 $1.28
Dec2002 $1.52
Dec2001 $1.39

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

CoreSite Realty Corp Valuation – Initial Coverage $COR
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Chesapeake Lodging Trust Valuation – December 2016 $CHSP
Summit Hotel Properties Inc Valuation – Initial Coverage $INN
Sabra Health Care REIT Inc Valuation – Initial Coverage $SBRA
National Retail Properties Inc Valuation – November 2016 $NNN
Welltower Inc Valuation – November 2016 $HCN
Realty Income Corp Valuation – November 2016 $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.

CoreSite Realty Corp Valuation – Initial Coverage $COR

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 – January 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 CoreSite Realty Corp (COR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CoreSite Realty Corporation (CoreSite) is an integrated, self-administered and self-managed real estate investment trust (REIT). Through its controlling interest in CoreSite, L.P. (Operating Partnership), the Company 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 D.C.), New York and San Francisco Bay areas, Chicago, Los Angeles, Boston, Miami and Denver. It delivers data center and interconnection solutions across approximately eight North American markets. It offers colocation and interconnection solutions for networks, cloud and information technology (IT) service providers and enterprise companies spanning a range of industries. The Company connects and delivers data and information technology infrastructure to approximately 900 enterprises, network operators, cloud providers and supporting service providers.

COR Chart

COR 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.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of COR – February 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 $4,212,716,791 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.18 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 10366.67% Pass
6. Moderate PEmg Ratio PEmg < 20 89.95 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.67 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 0.18 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.91 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 $0.97
MG Growth Estimate 15.00%
MG Value $37.35
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $14.07
MG Value based on 0% Growth $8.25
Market Implied Growth Rate 40.72%
Current Price $87.25
% of Intrinsic Value 233.63%

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 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. 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 $-0.02 in 2012 to an estimated $0.97 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 40.72% 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 $17.79. The company pays a dividend of $2.12 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 89.95, which was above the industry average of 31.91. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-26.36.

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) -$26.36
Graham Number $17.79
PEmg 89.95
Current Ratio 0.18
PB Ratio 6.67
Current Dividend $2.12
Dividend Yield 2.43%
Number of Consecutive Years of Dividend Growth 7

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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 9/1/2016
Total Current Assets $22,399,000
Total Current Liabilities $122,336,000
Long-Term Debt $590,992,000
Total Assets $1,359,992,000
Intangible Assets $57,450,000
Total Liabilities $916,244,000
Shares Outstanding (Diluted Average) 33,912,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.45
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 $0.97
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

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Tanger Factory Outlet Centers Inc Valuation – Initial Coverage $SKT
Mack Cali Realty Corp Valuation – Initial Coverage $CLI
Chesapeake Lodging Trust Valuation – December 2016 $CHSP
Summit Hotel Properties Inc Valuation – Initial Coverage $INN
Sabra Health Care REIT Inc Valuation – Initial Coverage $SBRA
National Retail Properties Inc Valuation – November 2016 $NNN
Welltower Inc Valuation – November 2016 $HCN
Realty Income Corp Valuation – November 2016 $O
American Campus Communities Valuation – November 2016 $ACC
Ventas Inc Valuation – August 2016 $VTR

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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