Prologis Inc Valuation – March 2019 #PLD

Company Profile (excerpt from Reuters): Prologis, Inc., incorporated on November 24, 1997, is a real estate investment trust (REIT) company. The Company is engaged in logistics real estate business. The Company’s segments include Real Estate Operations and Strategic Capital. The Company is focused on markets across the United States, Other Americas, Europe and Asia. As of December 31, 2016, the Company owned or had investments in, on an owned basis or through co-investment ventures, properties and development projects across 676 million square feet (63 million square meters) in 20 countries spanning four continents. The Company is the general partner of Prologis, L.P.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PLD – 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 $44,086,680,538 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.58 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 -208.65% Fail
6. Moderate PEmg Ratio PEmg < 20 31.80 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.78 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 1.58 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 22.96 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.20
MG Growth Estimate 15.00%
MG Value $84.67
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $31.89
MG Value based on 0% Growth $18.69
Market Implied Growth Rate 11.65%
Current Price $69.94
% of Intrinsic Value 82.60%

Prologis Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.95 in 2015 to an estimated $2.2 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.65% 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 Prologis Inc revealed the company was trading above its Graham Number of $31.26. The company pays a dividend of $1.92 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 31.8, which was below the industry average of 61.92, 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 $-17.25.

Prologis Inc performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$17.25
Graham Number $31.26
PEmg 31.80
Current Ratio 1.58
PB Ratio 1.78
Current Dividend $1.92
Dividend Yield 2.75%
Number of Consecutive Years of Dividend Growth 5

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 $1,314,251,000
Total Current Liabilities $831,318,000
Long-Term Debt $11,089,815,000
Total Assets $38,417,664,000
Intangible Assets $450,690,000
Total Liabilities $12,616,776,000
Shares Outstanding (Diluted Average) 655,159,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.23
Dec2018 $2.87
Dec2017 $3.06
Dec2016 $2.27
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 $0.75
Dec2001 $1.41
Dec2000 $1.35
Dec1999 $1.94

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.20
Dec2018 $2.53
Dec2017 $2.16
Dec2016 $1.52
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 $2.04
Dec2005 $1.80
Dec2004 $1.27
Dec2003 $1.26

Recommended Reading:

Other ModernGraham posts about the company

Prologis Inc Valuation – May 2018 $PLD
Prologis Inc Valuation – February 2017 $PLD
Prologis Inc. Valuation – October 2015 Update $PLD
28 Companies in the Spotlight This Week – 11/1/14
Prologis Inc. Annual Valuation – 2014 $PLD

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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.

Prologis Inc Valuation – May 2018 $PLD

Company Profile (excerpt from Reuters): Prologis, Inc., incorporated on November 24, 1997, is a real estate investment trust (REIT) company. The Company is engaged in logistics real estate business. The Company’s segments include Real Estate Operations and Strategic Capital. The Company is focused on markets across the United States, Other Americas, Europe and Asia. As of December 31, 2016, the Company owned or had investments in, on an owned basis or through co-investment ventures, properties and development projects across 676 million square feet (63 million square meters) in 20 countries spanning four continents. The Company is the general partner of Prologis, L.P.

PLD Chart

PLD data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of PLD – May 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 $33,743,240,892 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.66 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 -195.28% Fail
6. Moderate PEmg Ratio PEmg < 20 32.46 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.23 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 0.66 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -40.30 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.95
MG Growth Estimate 15.00%
MG Value $75.00
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $28.25
MG Value based on 0% Growth $16.56
Market Implied Growth Rate 11.98%
Current Price $63.24
% of Intrinsic Value 84.32%

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 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. 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 $0.09 in 2014 to an estimated $1.95 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 11.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Prologis Inc revealed the company was trading above its Graham Number of $27.27. The company pays a dividend of $1.76 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 32.46, which was below the industry average of 46.75, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-24.42.

Prologis 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) -$24.42
Graham Number $27.27
PEmg 32.46
Current Ratio 0.66
PB Ratio 2.23
Current Dividend $1.76
Dividend Yield 2.78%
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 3/1/2018
Total Current Assets $458,099,000
Total Current Liabilities $692,853,000
Long-Term Debt $9,460,177,000
Total Assets $29,671,485,000
Intangible Assets $0
Total Liabilities $13,991,410,000
Shares Outstanding (Diluted Average) 554,123,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.13
Dec2017 $3.06
Dec2016 $2.27
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 $0.75
Dec2001 $1.41
Dec2000 $1.35
Dec1999 $1.94
Dec1998 $1.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.95
Dec2017 $2.16
Dec2016 $1.52
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 $2.04
Dec2005 $1.80
Dec2004 $1.27
Dec2003 $1.26
Dec2002 $1.24

Recommended Reading:

Other ModernGraham posts about the company

Prologis Inc Valuation – February 2017 $PLD
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

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Vornado Realty Trust Valuation – April 2018 $VNO
Public Storage Valuation – March 2018 $PSA
Macerich Co Valuation – March 2018 $MAC
HCP Inc Valuation – March 2018 $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.

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

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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

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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 $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

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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.

Prologis Inc. Valuation – October 2015 Update $PLD

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

Company Profile (obtained from Google Finance): Prologis, Inc. is engaged in industrial logistics real estate, focused on markets across the Americas, Europe and Asia. The Company leases modern distribution facilities to more than 4,700 customers, including third-party logistics providers, transportation companies, retailers and manufacturers. The Company’s business consists of two operating segments: Real Estate Operations and Strategic Capital. The Company’s customer base represents a spectrum of international, national, regional and local distribution users. As of December 31, 2014, the Company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 590 million square feet (55 million square meters) in 21 countries.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of PLD – October 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 $22,323,147,051 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.65 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 -36.46% Fail
6. Moderate PEmg Ratio PEmg < 20 57.62 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.55 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 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -65.03 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

PLD value Chart October 2015

EPSmg $0.74
MG Growth Estimate 15.00%
MG Value $28.64
Opinion Overvalued
MG Value based on 3% Growth $10.79
MG Value based on 0% Growth $6.32
Market Implied Growth Rate 24.56%
Current Price $42.87
% of Intrinsic Value 149.66%

Prologis Inc. does not qualify for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, insufficient earnings growth or stability over the last ten years and high PEmg ratio while the Enterprising Investor is concerned with the level of debt relative to the current assets and the insufficient earnings stability over the last five years.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should look for other opportunities or proceed with a cautious speculative attitude.

As for a valuation, the company appears to be overvalued after growing its EPSmg (normalized earnings) from a loss of $1.71 in 2011 to an estimated gain of $0.74 for 2015.  This level of demonstrated earnings growth does not support the market’s implied estimate of 24.56% 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 Prologis Inc. (PLD)?  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

PLD Charts October 2015

Net Current Asset Value (NCAV) -$31.17
Graham Number $25.44
PEmg 57.62
Current Ratio 0.65
PB Ratio 1.55
Dividend Yield 3.22%
Number of Consecutive Years of Dividend Growth 2

 

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Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Total Current Assets $351,025,000
Total Current Liabilities $537,432,000
Long-Term Debt $12,121,310,000
Total Assets $31,602,400,000
Intangible Assets $0
Total Liabilities $16,891,650,000
Shares Outstanding (Diluted Average) 530,640,000

Earnings Per Share History

Next Fiscal Year Estimate $1.03
Dec14 $1.24
Dec13 $0.64
Dec12 -$0.18
Dec11 -$0.51
Dec10 -$5.90
Dec09 -$0.37
Dec08 -$0.68
Dec07 $2.96
Dec06 $2.30
Dec05 $2.85
Dec04 $1.39
Dec03 $1.41
Dec02 $0.75
Dec01 $1.41
Dec00 $1.35
Dec99 $1.94
Dec98 $1.26
Dec97 $1.38

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $0.74
Dec14 $0.09
Dec13 -$0.75
Dec12 -$1.47
Dec11 -$1.71
Dec10 -$1.65
Dec09 $0.78
Dec08 $1.50
Dec07 $2.45
Dec06 $2.04
Dec05 $1.80
Dec04 $1.27
Dec03 $1.26
Dec02 $1.24
Dec01 $1.48
Dec00 $1.40
Dec99 $1.26

Recommended Reading:

Other ModernGraham posts about the company

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

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Ventas Inc. Analysis – 2015 Update $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.

Prologis Inc. Annual Valuation – 2014 $PLD

hd_logoREITs often attract a great deal of investors because of their strong cash flows and dividends, and those investors often overlook other parts of the business, choosing to analyze the company under a different set of criteria than companies in other sectors.  This can create a problem in that it becomes difficult to compare a REIT to an industrial, which is fine if you use the typical top-down approach to stock selection; however, a top-down approach invites speculation in the fact that you are theorizing which sector will perform well going forward.  Benjamin Graham taught that we should avoid speculation as much as possible, which is why it is critical to develop a system for analyzing companies that will allow them to be compared across industries.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another investment opportunity.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Prologis Inc. (PLD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Prologis, Inc. (Prologis) is a real estate investment trust (REIT) and the general partner of the Prologis, L.P. As of December 31, 2012, it owned an approximate 99.59% common general partnership interest in the Prologis, L.P. and 100% of the preferred units in the Prologis, L.P. The Company is a global owner, operator and developer of industrial real estate, focused on markets tied to global trade across the Americas, Europe and Asia. It operates the REIT and the Operating Partnership as one enterprise. The Company operates in two segments: segments: real estate operations and private capital. The Company co-invests in entities that own multiple properties with private capital investors and provide asset and property management services to these entities. Effective January 8, 2014, Prologis Inc acquired six Class-A logistics facilities, located in Nashville, Tennessee. In June 2014, it sold a 7.5 million square foot industrial portfolio in the United States to TPG.

PLD Chart

PLD data by YCharts

Defensive Investor – must pass at least 6 of the following 7 tests: Score = 2/7

  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 – FAIL
  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 – FAIL

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

Valuation Summary

Key Data:

Balance Sheet – June 2014

Current Assets $391,000,000
Current Liabilities $616,000,000
Total Debt $8,529,000,000
Total Assets $24,132,000,000
Intangible Assets $0
Total Liabilities $10,560,000,000
Outstanding Shares 516,600,000

Earnings Per Share

2014 (estimate) $0.24
2013 $0.64
2012 -$0.18
2011 -$0.51
2010 -$5.90
2009 -$0.37
2008 -$0.68
2007 $2.96
2006 $2.30
2005 $2.85
2004 $1.39

Earnings Per Share – ModernGraham

2014 (estimate) -$0.25
2013 -$0.75
2012 -$1.47
2011 -$1.71
2010 -$1.65
2009 $0.78

Dividend History
PLD Dividend Chart

PLD Dividend data by YCharts

Conclusion:

Prologis Inc. is not suitable for either the Defensive Investor or the Enterprising Investor.  The Defensive Investor is concerned with the low current ratio, the lack of sufficient earnings growth or stability over the last ten years, and the high PEmg and PB ratios.  The Enterprising Investor is concerned with the high level of debt relative to the current assets and the lack of stable earnings over the last five years.  As a result, value investors following the ModernGraham approach should explore other opportunities at this time.  From a valuation side of things, the company appears to be overvalued after growing its EPSmg (normalized earnings) from a loss of $1.65 in 2010 to only an estimated loss of $0.25 in 2014.  While this demonstrated growth is somewhat promising, no company with a negative EPSmg will have a strong intrinsic value.  The ModernGraham valuation model returns an estimate of intrinsic value that is well below the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Prologis Inc. (PLD)?  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 Prologis Inc. (PLD) or any other company mentioned in the article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from wikipedia; this article is not affiliated with the company in any manner.

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

Other ModernGraham posts about related companies

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.

Kimco Realty Corp Valuation – March 2019 #KIM

Company Profile (excerpt from Reuters): Kimco Realty Corporation, incorporated on March 25, 1994, is a self-administered real estate investment trust. The Company is engaged in the ownership, management, development and operation of open-air shopping centers, which are anchored generally by discount department stores, grocery stores or drugstores. As of June 30, 2017, the Company had interests in 510 shopping center properties, including 84 million square feet of gross leasable area (GLA), located in 32 states, Puerto Rico and Canada. As of March 31, 2017, the Company had 380 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling 5.8 million square feet of GLA.

KIM Chart

KIM data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of KIM – 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 $7,773,219,770 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.12 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 163.74% Pass
6. Moderate PEmg Ratio PEmg < 20 21.56 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.43 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 < 1.1 130.35 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 $0.85
MG Growth Estimate -2.95%
MG Value $2.22
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $12.39
MG Value based on 0% Growth $7.26
Market Implied Growth Rate 6.53%
Current Price $18.43
% of Intrinsic Value 830.10%

Kimco 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, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $1.06 in 2015 to an estimated $0.85 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 6.53% 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 Kimco Realty Corp revealed the company was trading above its Graham Number of $12.05. The company pays a dividend of $1.12 per share, for a yield of 6.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 21.56, which was below the industry average of 61.92, 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 $-12.51.

Kimco 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) -$12.51
Graham Number $12.05
PEmg 21.56
Current Ratio 1.12
PB Ratio 1.43
Current Dividend $1.12
Dividend Yield 6.08%
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 12/1/2018
Total Current Assets $342,557,000
Total Current Liabilities $305,165,000
Long-Term Debt $4,873,872,000
Total Assets $10,999,100,000
Intangible Assets $0
Total Liabilities $5,588,047,000
Shares Outstanding (Diluted Average) 419,246,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.51
Dec2018 $1.02
Dec2017 $0.87
Dec2016 $0.79
Dec2015 $2.00
Dec2014 $0.89
Dec2013 $0.43
Dec2012 $0.42
Dec2011 $0.27
Dec2010 $0.22
Dec2009 -$0.15
Dec2008 $0.78
Dec2007 $1.65
Dec2006 $1.70
Dec2005 $1.52
Dec2004 $1.15
Dec2003 $0.97
Dec2002 $0.98
Dec2001 $0.95
Dec2000 $0.84
Dec1999 $0.74

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.85
Dec2018 $1.06
Dec2017 $1.05
Dec2016 $1.06
Dec2015 $1.06
Dec2014 $0.55
Dec2013 $0.33
Dec2012 $0.29
Dec2011 $0.33
Dec2010 $0.52
Dec2009 $0.82
Dec2008 $1.32
Dec2007 $1.53
Dec2006 $1.40
Dec2005 $1.20
Dec2004 $1.02
Dec2003 $0.94

Recommended Reading:

Other ModernGraham posts about the company

Kimco Realty Corp Valuation – June 2018 $KIM
Kimco Realty Corp Valuation – March 2017 $KIM
5 Companies for Enterprising Investors Near 52 Week Lows – March 2017
10 Best Dividend Paying Stocks for the Enterprising Investor – February 2017
5 Companies for Enterprising Investors Near 52 Week Lows – February 2017

Other ModernGraham posts about related companies

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
Realty Income Corp Valuation – February 2019 $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.

Essex Property Trust Inc Valuation – March 2019 #ESS

Company Profile (excerpt from Reuters): Essex Property Trust, Inc., incorporated on March 11, 1994, is a self-administered and self-managed real estate investment trust (REIT). The Company is engaged primarily in the ownership, operation, management, acquisition, development and redevelopment of predominantly apartment communities, located along the West Coast. Its segments include Southern California, Northern California, Seattle Metro and Other real estate assets. The Company owns all of its interest in its real estate and other investments directly or indirectly through Essex Portfolio, L.P. (the Operating Partnership). As of December 31, 2016, the Company owned or held an interest in 245 communities, aggregating 59,645 apartment homes, excluding the Company’s ownership in preferred equity investments, as well as two operating commercial buildings (totaling approximately 140,564 square feet), and six active development projects with 2,223 apartment homes in various stages of development.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of ESS – 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 $19,097,355,643 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.83 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 196.37% Pass
6. Moderate PEmg Ratio PEmg < 20 52.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.00 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 0.83 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -107.33 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $5.52
MG Growth Estimate 12.07%
MG Value $180.19
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $80.03
MG Value based on 0% Growth $46.91
Market Implied Growth Rate 22.09%
Current Price $290.71
% of Intrinsic Value 161.34%

Essex Property Trust 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 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 $3.06 in 2015 to an estimated $5.52 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 22.09% 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 Essex Property Trust Inc revealed the company was trading above its Graham Number of $100.18. The company pays a dividend of $7.44 per share, for a yield of 2.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 52.67, which was below the industry average of 61.92, 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 $-86.69.

Essex Property Trust 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) -$86.69
Graham Number $100.18
PEmg 52.67
Current Ratio 0.83
PB Ratio 3.00
Current Dividend $7.44
Dividend Yield 2.56%
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 12/1/2018
Total Current Assets $262,729,000
Total Current Liabilities $314,960,000
Long-Term Debt $5,605,942,000
Total Assets $12,383,596,000
Intangible Assets $0
Total Liabilities $5,989,752,000
Shares Outstanding (Diluted Average) 66,061,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.69
Dec2018 $5.90
Dec2017 $6.57
Dec2016 $6.27
Dec2015 $3.49
Dec2014 $2.06
Dec2013 $4.04
Dec2012 $3.41
Dec2011 $1.24
Dec2010 $1.14
Dec2009 $2.91
Dec2008 $2.09
Dec2007 $4.24
Dec2006 $2.45
Dec2005 $3.32
Dec2004 $3.36
Dec2003 $1.57
Dec2002 $2.60
Dec2001 $2.63
Dec2000 $2.37
Dec1999 $2.36

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.52
Dec2018 $5.58
Dec2017 $5.10
Dec2016 $4.20
Dec2015 $3.06
Dec2014 $2.69
Dec2013 $2.85
Dec2012 $2.22
Dec2011 $1.86
Dec2010 $2.30
Dec2009 $2.92
Dec2008 $2.98
Dec2007 $3.28
Dec2006 $2.76
Dec2005 $2.84
Dec2004 $2.57
Dec2003 $2.22

Recommended Reading:

Other ModernGraham posts about the company

Essex Property Trust Inc Valuation – June 2018 $ESS
Essex Property Trust Inc Valuation – March 2017 $ESS
Essex Property Trust Inc. Analysis – October 2015 Update $ESS
Essex Property Trust Inc. Analysis – Initial Coverage $ESS

Other ModernGraham posts about related companies

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
Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $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.

Federal Realty Investment Trust Valuation – March 2019 #FRT

Company Profile (excerpt from Reuters): Federal Realty Investment Trust, incorporated on May 21, 1999, is an equity real estate investment trust (REIT). The Company specializes in the ownership, management and redevelopment of retail and mixed-use properties located primarily in affluent communities in selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, as well as in California and South Florida. As of December 31, 2016, the Company owned or had an interest in community and neighborhood shopping centers and mixed-use properties, which operated as 96 retail real estate projects and included approximately 22.6 million square feet. As of December 31, 2016, its 96 retail shopping center and mixed-use properties were located in 12 states and the District of Columbia. As of December 31, 2016, there were approximately 2,900 leases with tenants providing a range of retail products and services. These tenants range from sole proprietorships to national retailers, or corporate group of tenants.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FRT – 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 $9,809,619,332 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.83 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 52.19% Pass
6. Moderate PEmg Ratio PEmg < 20 40.21 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.95 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 1.83 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 13.82 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 $3.28
MG Growth Estimate 3.85%
MG Value $53.18
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $47.57
MG Value based on 0% Growth $27.89
Market Implied Growth Rate 15.85%
Current Price $131.91
% of Intrinsic Value 248.06%

Federal Realty Investment Trust is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.61 in 2015 to an estimated $3.28 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.85% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Federal Realty Investment Trust revealed the company was trading above its Graham Number of $43.9. The company pays a dividend of $4.04 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 40.21, which was below the industry average of 61.92, 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 $-44.98.

Federal Realty Investment Trust performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$44.98
Graham Number $43.90
PEmg 40.21
Current Ratio 1.83
PB Ratio 3.95
Current Dividend $4.04
Dividend Yield 3.06%
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 12/1/2018
Total Current Assets $502,456,000
Total Current Liabilities $274,004,000
Long-Term Debt $3,157,685,000
Total Assets $6,289,644,000
Intangible Assets $0
Total Liabilities $3,822,314,000
Shares Outstanding (Diluted Average) 73,800,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.91
Dec2018 $3.18
Dec2017 $3.97
Dec2016 $3.50
Dec2015 $3.03
Dec2014 $2.41
Dec2013 $2.46
Dec2012 $2.35
Dec2011 $2.28
Dec2010 $1.98
Dec2009 $1.63
Dec2008 $2.19
Dec2007 $3.45
Dec2006 $1.92
Dec2005 $1.94
Dec2004 $1.41
Dec2003 $1.59
Dec2002 $0.85
Dec2001 $1.09
Dec2000 $1.35
Dec1999 $1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.28
Dec2018 $3.38
Dec2017 $3.35
Dec2016 $2.94
Dec2015 $2.61
Dec2014 $2.37
Dec2013 $2.28
Dec2012 $2.15
Dec2011 $2.14
Dec2010 $2.12
Dec2009 $2.20
Dec2008 $2.39
Dec2007 $2.34
Dec2006 $1.71
Dec2005 $1.53
Dec2004 $1.30
Dec2003 $1.22

Recommended Reading:

Other ModernGraham posts about the company

Federal Realty Investment Trust Valuation – June 2018 $FRT
Federal Realty Investment Trust Valuation – Initial Coverage $FRT

Other ModernGraham posts about related companies

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
Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $VTR
SL Green Realty Corp Valuation – February 2019 $SLG

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.

UDR Inc Valuation – March 2019 #UDR

Company Profile (excerpt from Reuters): UDR, Inc., incorporated on May 2, 2003, is a self-administered real estate investment trust. The Company owns, operates, acquires, renovates, develops, redevelops, disposes of and manages multifamily apartment communities generally located in various markets across the United States. The Company’s segments are Same-Store Communities and Non-Mature Communities/Other. As of December 31, 2016, the Company’s consolidated real estate portfolio included 127 communities located in 18 markets, with a total of 39,454 completed apartment homes. As of December 31, 2016, the Company also had an ownership interest in 27 communities containing 6,849 apartment homes through unconsolidated joint ventures or partnerships.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UDR – 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 $12,306,036,035 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.08 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 504.55% Pass
6. Moderate PEmg Ratio PEmg < 20 78.98 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.14 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 1.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 199.47 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 $0.57
MG Growth Estimate -3.48%
MG Value $0.87
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $8.20
MG Value based on 0% Growth $4.81
Market Implied Growth Rate 35.24%
Current Price $44.65
% of Intrinsic Value 5117.01%

UDR, 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 and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.74 in 2015 to an estimated $0.57 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 35.24% 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 UDR, Inc. revealed the company was trading above its Graham Number of $5.92. The company pays a dividend of $1.28 per share, for a yield of 2.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 78.98, which was above the industry average of 61.92. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.75.

UDR, 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) -$16.75
Graham Number $5.92
PEmg 78.98
Current Ratio 1.08
PB Ratio 4.14
Current Dividend $1.28
Dividend Yield 2.86%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

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

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $251,150,000
Total Current Liabilities $233,364,000
Long-Term Debt $3,547,787,000
Total Assets $7,711,728,000
Intangible Assets $0
Total Liabilities $4,788,951,000
Shares Outstanding (Diluted Average) 270,872,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.15
Dec2018 $0.74
Dec2017 $0.44
Dec2016 $1.08
Dec2015 $1.29
Dec2014 $0.59
Dec2013 $0.16
Dec2012 $0.85
Dec2011 $0.05
Dec2010 -$0.68
Dec2009 -$0.64
Dec2008 $5.29
Dec2007 $1.41
Dec2006 $0.85
Dec2005 $1.03
Dec2004 $0.56
Dec2003 $0.21
Dec2002 $0.24
Dec2001 $0.27
Dec2000 $0.41
Dec1999 $0.54

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.57
Dec2018 $0.79
Dec2017 $0.78
Dec2016 $0.90
Dec2015 $0.74
Dec2014 $0.37
Dec2013 $0.16
Dec2012 $0.43
Dec2011 $0.51
Dec2010 $0.91
Dec2009 $1.66
Dec2008 $2.48
Dec2007 $0.99
Dec2006 $0.71
Dec2005 $0.58
Dec2004 $0.35
Dec2003 $0.28

Recommended Reading:

Other ModernGraham posts about the company

UDR Inc Valuation – June 2018 $UDR
UDR Inc Valuation – Initial Coverage $UDR

Other ModernGraham posts about related companies

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
Realty Income Corp Valuation – February 2019 $O
Ventas Inc Valuation – February 2019 $VTR
SL Green Realty Corp Valuation – February 2019 $SLG
Regency Centers Corp Valuation – February 2019 $REG

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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