Ventas Inc Valuation – February 2019 $VTR

Company Profile (excerpt from Reuters): Ventas, Inc., incorporated on June 22, 1987, is a real estate investment trust (REIT) with its properties located throughout the United States, Canada and the United Kingdom. The Company operates through three segments: triple-net leased properties, senior living operations and office operations. Under its triple-net leased properties segment, the Company acquires and owns seniors housing and healthcare properties throughout the United States and the United Kingdom and leases those properties to healthcare operating companies under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses. In its senior living operations segment, the Company invests in seniors housing communities throughout the United States and Canada and engages independent operators to manage those communities. In its office operations segment, the Company primarily acquires, owns, develops, leases and manages medical office buildings (MOBs) and life science and innovation centers throughout the United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VTR – February 2019

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,220,325,302 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.28 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 40.27% Pass
6. Moderate PEmg Ratio PEmg < 20 36.30 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.28 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 0.28 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -12.51 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.79
MG Growth Estimate 3.95%
MG Value $29.43
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $26.02
MG Value based on 0% Growth $15.25
Market Implied Growth Rate 13.90%
Current Price $65.14
% of Intrinsic Value 221.35%

Ventas, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.42 in 2015 to an estimated $1.79 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.9% 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 Ventas, Inc. revealed the company was trading above its Graham Number of $27.93. The company pays a dividend of $3.16 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 36.3, which was below the industry average of 81.61, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-33.29.

Ventas, 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) -$33.29
Graham Number $27.93
PEmg 36.30
Current Ratio 0.28
PB Ratio 2.28
Current Dividend $3.16
Dividend Yield 4.86%
Number of Consecutive Years of Dividend Growth 2

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 $327,754,000
Total Current Liabilities $1,185,902,000
Long-Term Debt $10,733,699,000
Total Assets $22,584,555,000
Intangible Assets $2,559,126,000
Total Liabilities $12,312,961,000
Shares Outstanding (Diluted Average) 360,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.21
Dec2018 $1.14
Dec2017 $3.78
Dec2016 $1.86
Dec2015 $1.25
Dec2014 $1.60
Dec2013 $1.54
Dec2012 $1.23
Dec2011 $1.58
Dec2010 $1.56
Dec2009 $1.74
Dec2008 $1.59
Dec2007 $2.25
Dec2006 $1.25
Dec2005 $1.36
Dec2004 $1.43
Dec2003 $2.03
Dec2002 $0.93
Dec2001 $0.73
Dec2000 -$0.96
Dec1999 $0.63

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.79
Dec2018 $2.03
Dec2017 $2.32
Dec2016 $1.56
Dec2015 $1.42
Dec2014 $1.50
Dec2013 $1.48
Dec2012 $1.48
Dec2011 $1.65
Dec2010 $1.69
Dec2009 $1.71
Dec2008 $1.66
Dec2007 $1.68
Dec2006 $1.40
Dec2005 $1.41
Dec2004 $1.24
Dec2003 $0.98

Recommended Reading:

Other ModernGraham posts about the company

Ventas Inc Valuation – April 2018 $VTR
Ventas Inc Valuation – August 2016 $VTR
Ventas Inc. Analysis – 2015 Update $VTR
19 Companies in the Spotlight This Week – 7/26/14
Ventas Inc. Annual Valuation – 2014 $VTR

Other ModernGraham posts about related companies

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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.

Ventas Inc Valuation – April 2018 $VTR

Company Profile (excerpt from Reuters): Ventas, Inc., incorporated on June 22, 1987, is a real estate investment trust (REIT) with its properties located throughout the United States, Canada and the United Kingdom. The Company operates through three segments: triple-net leased properties, senior living operations and office operations. Under its triple-net leased properties segment, the Company acquires and owns seniors housing and healthcare properties throughout the United States and the United Kingdom and leases those properties to healthcare operating companies under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses. In its senior living operations segment, the Company invests in seniors housing communities throughout the United States and Canada and engages independent operators to manage those communities. In its office operations segment, the Company primarily acquires, owns, develops, leases and manages medical office buildings (MOBs) and life science and innovation centers throughout the United States.

VTR Chart

VTR data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of VTR – April 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 $17,339,717,824 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.32 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 45.29% Pass
6. Moderate PEmg Ratio PEmg < 20 22.78 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.61 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 0.32 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -13.00 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

EPSmg $2.14
MG Growth Estimate 6.30%
MG Value $45.09
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $30.98
MG Value based on 0% Growth $18.16
Market Implied Growth Rate 7.14%
Current Price $48.68
% of Intrinsic Value 107.97%

Ventas, 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 $1.5 in 2014 to an estimated $2.14 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.14% 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 Ventas, Inc. revealed the company was trading above its Graham Number of $31.55. The company pays a dividend of $3.12 per share, for a yield of 6.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 22.78, which was below the industry average of 44.79, 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 $-35.3.

Ventas, 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) -$35.30
Graham Number $31.55
PEmg 22.78
Current Ratio 0.32
PB Ratio 1.61
Current Dividend $3.12
Dividend Yield 6.40%
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 12/1/2017
Total Current Assets $408,791,000
Total Current Liabilities $1,276,510,000
Long-Term Debt $11,276,062,000
Total Assets $23,954,541,000
Intangible Assets $1,041,137,000
Total Liabilities $13,088,315,000
Shares Outstanding (Diluted Average) 359,169,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.45
Dec2017 $3.78
Dec2016 $1.86
Dec2015 $1.25
Dec2014 $1.60
Dec2013 $1.54
Dec2012 $1.23
Dec2011 $1.58
Dec2010 $1.56
Dec2009 $1.74
Dec2008 $1.59
Dec2007 $2.25
Dec2006 $1.25
Dec2005 $1.36
Dec2004 $1.43
Dec2003 $2.03
Dec2002 $0.93
Dec2001 $0.73
Dec2000 -$0.96
Dec1999 $0.63
Dec1998 $0.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.14
Dec2017 $2.32
Dec2016 $1.56
Dec2015 $1.42
Dec2014 $1.50
Dec2013 $1.48
Dec2012 $1.48
Dec2011 $1.65
Dec2010 $1.69
Dec2009 $1.71
Dec2008 $1.66
Dec2007 $1.68
Dec2006 $1.40
Dec2005 $1.41
Dec2004 $1.24
Dec2003 $0.98
Dec2002 $0.42

Recommended Reading:

Other ModernGraham posts about the company

Ventas Inc Valuation – August 2016 $VTR
Ventas Inc. Analysis – 2015 Update $VTR
19 Companies in the Spotlight This Week – 7/26/14
Ventas Inc. Annual Valuation – 2014 $VTR

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
Apartment Investment & Management Co Valuation – March 2018 $AIV
Crown Castle International Corp Valuation – March 2018 $CCI
GGP Inc Valuation – March 2018 $GGP

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.

Ventas Inc Valuation – August 2016 $VTR

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 Ventas Inc (VTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ventas, Inc. is a healthcare real estate investment trust (REIT) with its properties located throughout the United States, Canada and the United Kingdom. The Company operates through three segments: triple-net leased properties, senior living operations and MOB operations. In its triple-net leased properties segment, the Company acquires and owns seniors housing and healthcare properties throughout the United States and the United Kingdom. Through its senior living operations segment, the Company invests in seniors housing communities throughout the United States and Canada, and engages independent operators to manage approximately 304 of its seniors housing communities. It owns approximately 1,300 properties, including properties classified as held for sale; MOBs; skilled nursing facilities; specialty hospitals, and general acute care hospitals. It leases approximately 575 properties to various healthcare operating companies under triple-net or absolute-net leases.

VTR Chart

VTR data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of VTR – August 2016

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

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $25,421,571,221 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.10 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 -0.18% Fail
6. Moderate PEmg Ratio PEmg < 20 39.34 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.57 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 0.10 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -9.89 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

VTR value chart August 2016

EPSmg $1.85
MG Growth Estimate 3.71%
MG Value $29.40
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $26.79
MG Value based on 0% Growth $15.70
Market Implied Growth Rate 15.42%
Current Price $72.67
% of Intrinsic Value 247.22%

Ventas, 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 growth 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. 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 $1.48 in 2012 to an estimated $1.85 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 15.42% 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 Ventas, Inc. revealed the company was trading above its Graham Number of $41.7. The company pays a dividend of $2.92 per share, for a yield of 4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 39.34, which was above the industry average of 34.03. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-35.85.

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

Stage 3: Information for Further Research

VTR charts August 2016

Net Current Asset Value (NCAV) -$35.85
Graham Number $41.70
PEmg 39.34
Current Ratio 0.10
PB Ratio 2.57
Current Dividend $2.92
Dividend Yield 4.02%
Number of Consecutive Years of Dividend Growth 0

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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 6/1/2016
Total Current Assets $122,948,000
Total Current Liabilities $1,224,879,000
Long-Term Debt $10,901,131,000
Total Assets $22,093,472,000
Intangible Assets $2,386,388,000
Total Liabilities $12,403,757,000
Shares Outstanding (Diluted Average) 342,571,000

Earnings Per Share History

Next Fiscal Year Estimate $2.72
Dec2015 $1.25
Dec2014 $1.60
Dec2013 $1.54
Dec2012 $1.23
Dec2011 $1.58
Dec2010 $1.56
Dec2009 $1.74
Dec2008 $1.59
Dec2007 $2.25
Dec2006 $1.25
Dec2005 $1.36
Dec2004 $1.43
Dec2003 $2.03
Dec2002 $0.93
Dec2001 $0.73
Dec2000 -$0.96
Dec1999 $0.63
Dec1998 $0.39
Dec1997 $1.86
Dec1996 $0.68

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.85
Dec2015 $1.42
Dec2014 $1.50
Dec2013 $1.48
Dec2012 $1.48
Dec2011 $1.65
Dec2010 $1.69
Dec2009 $1.71
Dec2008 $1.66
Dec2007 $1.68
Dec2006 $1.40
Dec2005 $1.41
Dec2004 $1.24
Dec2003 $0.98
Dec2002 $0.42
Dec2001 $0.29
Dec2000 $0.22

Recommended Reading:

Other ModernGraham posts about the company

Ventas Inc. Analysis – 2015 Update $VTR
19 Companies in the Spotlight This Week – 7/26/14
Ventas Inc. Annual Valuation – 2014 $VTR

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.

Ventas Inc. Analysis – 2015 Update $VTR

logo (1)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 Ventas Inc. (VTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ventas, Inc. is a real estate investment trust (REIT). The Company has a portfolio of seniors housing and healthcare properties located throughout the United States, Canada and the United Kingdom. The Company operates through three segments: triple-net leased properties, senior living operations and MOB operations. The triple-net leased properties segment invests in seniors housing and healthcare properties throughout the United States and the United Kingdom and lease those properties to healthcare operating companies under triple-net or absolute-net leases that obligate the tenants to pay all property-related expenses. The senior living operations segment invests in seniors housing communities throughout the United States and Canada and engages independent operators, such as Atria and Sunrise, to manage those communities. The MOB operations segment, acquires, owns, develops, leases, and manages MOBs throughout the United States. It invests in seniors housing and healthcare properties.

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 – 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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

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

Valuation Summary

Key Data:

Recent Price $66.56
MG Value $60.68
MG Opinion Fairly Valued
Value Based on 3% Growth $36.45
Value Based on 0% Growth $21.37
Market Implied Growth Rate 8.99%
Net Current Asset Value (NCAV) -$38.96
PEmg 26.48
Current Ratio 0.39
PB Ratio 1.98

Balance Sheet – March 2015

Current Assets $574,000,000
Current Liabilities $1,466,000,000
Total Debt $11,604,000,000
Total Assets $24,440,000,000
Intangible Assets $1,128,000,000
Total Liabilities $13,400,000,000
Outstanding Shares 329,200,000

Earnings Per Share

2015 (estimate) $4.53
2014 $1.60
2013 $1.54
2012 $1.23
2011 $1.58
2010 $1.56
2009 $1.74
2008 $1.59
2007 $2.25
2006 $1.25
2005 $1.36

Earnings Per Share – ModernGraham

2015 (estimate) $2.51
2014 $1.50
2013 $1.48
2012 $1.48
2011 $1.65
2010 $1.69

Dividend History

Free Cash Flow

Conclusion:

Ventas Inc. is not suitable for either the Enterprising Investor or the more conservative Defensive Investor.  The Defensive Investor is concerned with the low current ratio, and the high PEmg ratio.  The Enterprising Investor is concerned with the high 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.  From a valuation side of things, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.65 in 2011 to an estimated $2.51 for 2015.  This level of growth supports the market’s implied estimate of 8.99% annual earnings growth over the next 7-10 years, leading the ModernGraham valuation model to return an estimate of intrinsic value falling within a margin of safety relative to the current 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 Ventas Inc. (VTR)?  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.

Ventas Inc. Annual Valuation – 2014 $VTR

logo (1)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 5 Undervalued Companies for the Defensive Investor.  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 Ventas Inc. (VTR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Ventas, Inc. is a real estate investment trust (REIT) with a geographically diverse portfolio of seniors housing and healthcare properties throughout the United States and Canada. As of December 31, 2011, the Company operated through three business segments: triple-net leased properties, senior living operations and MOB operations. As of December 31, 2011, the Company owned 1,378 properties located in 46 states, the District of Columbia and two Canadian provinces, consisting of 678 seniors housing communities; 396 skilled nursing facilities; 47 hospitals; 249 medical office buildings (MOBs), and eight personal care facilities. The Company was in the process of developing three properties as of December 31, 2011. In July 2011, it acquired Nationwide Health Properties, Inc. (NHP). In June 2012, the Company sold 12 seniors housing communities to Assisted Living Concepts, Inc. In June 2014, the Company acquired ARC Healthcare.
VTR Chart

VTR 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 – 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 – PASS
  6. Moderate PEmg ratio – PEmg is less than 20 – FAIL
  7. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

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

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

Valuation Summary

Key Data:

Recent Price $64.73
MG Value $81.98
MG Opinion Fairly Valued
Value Based on 3% Growth $34.83
Value Based on 0% Growth $20.42
Market Implied Growth Rate 9.22%
Net Current Asset Value (NCAV) -$36.05
PEmg 26.95
Current Ratio 0.29
PB Ratio 2.18

Balance Sheet – 3/31/2014

Current Assets $360,600,000
Current Liabilities $1,251,700,000
Total Debt $9,481,100,000
Total Assets $19,702,800,000
Intangible Assets $474,600,000
Total Liabilities $10,971,100,000
Outstanding Shares 294,340,000

Earnings Per Share

2014 (estimate) $4.35
2013 $1.66
2012 $1.04
2011 $1.57
2010 $1.38
2009 $1.27
2008 $1.30
2007 $1.15
2006 $1.25
2005 $1.31
2004 $1.19

Earnings Per Share – ModernGraham

2014 (estimate) $2.40
2013 $1.41
2012 $1.30
2011 $1.40
2010 $1.30
2009 $1.25

Dividend History

VTR Dividend Chart

VTR Dividend data by YCharts

Conclusion:

Ventas does not qualify for the Defensive Investor or the Enterprising Investor.  The Defensive Investor has issues with the low current ratio and the high PEmg ratio.  The Enterprising Investor is concerned with the high level of debt relative to the net current assets.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities.  As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.30 in 2010 to an estimated $2.40 in 2014.  This level of demonstrated growth supports the market’s implied estimate of 9.22% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham’s formula, to return an estimate of intrinsic value within a margin of safety relative to 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 Ventas Inc. (VTR)?  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 Ventas Inc. (VTR) or in any other 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 or the company website for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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.

Mid-America Apartment Communities Inc Valuation – March 2019 #MAA

Company Profile (excerpt from Reuters): Mid-America Apartment Communities, Inc. (MAA), incorporated on September 22, 1993, is a multifamily focused, self-administered and self-managed real estate investment trust (REIT). The Company owns, operates, acquires and develops apartment communities primarily located in the Southeast and Southwest regions of the United States. It operates through three segments: Large market same store, Secondary market same store and Non-Same Store and Other. Its Large market same store communities are communities in markets with a population of at least one million and at least 1% of the total public multifamily REIT units that it has owned and that have been stabilized for at least a full 12 months. Its Secondary market same store communities are communities in markets with populations of more than one million but less than 1% of the total public multifamily REIT units or markets with populations of less than one million that it has owned and that have been stabilized for at least a full 12 months. Its Non-same store communities and other includes recent acquisitions and communities in development or lease-up communities.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAA – 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 $12,056,183,749 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.08 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 52.37% Pass
6. Moderate PEmg Ratio PEmg < 20 44.26 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.89 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 0.08 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.93 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.39
MG Growth Estimate -2.51%
MG Value $8.32
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $34.69
MG Value based on 0% Growth $20.34
Market Implied Growth Rate 17.88%
Current Price $105.90
% of Intrinsic Value 1273.44%

Mid-America Apartment Communities Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, 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 $2.87 in 2015 to an estimated $2.39 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 17.88% 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 Mid-America Apartment Communities Inc revealed the company was trading above its Graham Number of $48.81. The company pays a dividend of $3.69 per share, for a yield of 3.5%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 44.27, 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 $-43.18.

Mid-America Apartment Communities Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$43.18
Graham Number $48.81
PEmg 44.27
Current Ratio 0.08
PB Ratio 1.89
Current Dividend $3.69
Dividend Yield 3.48%
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 $34,259,000
Total Current Liabilities $413,850,000
Long-Term Debt $4,528,328,000
Total Assets $11,323,781,000
Intangible Assets $3,900,000
Total Liabilities $4,951,592,000
Shares Outstanding (Diluted Average) 113,881,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.96
Dec2018 $1.93
Dec2017 $2.86
Dec2016 $2.69
Dec2015 $4.41
Dec2014 $1.97
Dec2013 $2.25
Dec2012 $2.56
Dec2011 $1.31
Dec2010 $0.56
Dec2009 $0.85
Dec2008 $0.64
Dec2007 $1.01
Dec2006 $0.29
Dec2005 $0.25
Dec2004 $0.50
Dec2003 -$0.07
Dec2002 -$0.11
Dec2001 $0.72
Dec2000 $0.78
Dec1999 $0.93

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.39
Dec2018 $2.66
Dec2017 $2.97
Dec2016 $2.94
Dec2015 $2.87
Dec2014 $1.98
Dec2013 $1.83
Dec2012 $1.47
Dec2011 $0.91
Dec2010 $0.70
Dec2009 $0.71
Dec2008 $0.61
Dec2007 $0.53
Dec2006 $0.25
Dec2005 $0.24
Dec2004 $0.27
Dec2003 $0.26

Recommended Reading:

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Mid-America Apartment Communities Inc Valuation – June 2018 $MAA
Mid-America Apartment Communities Inc Valuation – Initial Coverage $MAA

Other ModernGraham posts about related companies

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
Host Hotels & Resorts Inc Valuation – February 2019 $HST

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.

Extra Space Storage Inc Valuation – March 2019 #EXR

Company Profile (excerpt from Reuters): Extra Space Storage Inc., incorporated on April 30, 2004, is a self-administered and self-managed real estate investment trust (REIT). The Company owns, operates, manages, acquires, develops and redevelops self-storage properties located throughout the United States. The Company operates through three segments: rental operations; tenant reinsurance, and property management, acquisition and development. The Company’s rental operations activities include rental operations of stores in which it has an ownership interest. The Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in its stores. The Company’s property management, acquisition and development activities include managing, acquiring, developing and selling stores.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EXR – 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 $12,701,894,064 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.50 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 403.54% Pass
6. Moderate PEmg Ratio PEmg < 20 32.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.79 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 0.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -65.05 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 $3.10
MG Growth Estimate 15.00%
MG Value $119.20
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $44.89
MG Value based on 0% Growth $26.32
Market Implied Growth Rate 11.86%
Current Price $99.78
% of Intrinsic Value 83.71%

Extra Space Storage, 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.42 in 2015 to an estimated $3.1 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.86% 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 Extra Space Storage, Inc. revealed the company was trading above its Graham Number of $35.52. The company pays a dividend of $3.36 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 32.23, 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 $-37.35.

Extra Space Storage, 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) -$37.35
Graham Number $35.52
PEmg 32.23
Current Ratio 0.50
PB Ratio 4.79
Current Dividend $3.36
Dividend Yield 3.37%
Number of Consecutive Years of Dividend Growth 9

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $72,690,000
Total Current Liabilities $146,658,000
Long-Term Debt $4,811,515,000
Total Assets $7,847,978,000
Intangible Assets $0
Total Liabilities $5,062,556,000
Shares Outstanding (Diluted Average) 133,589,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.94
Dec2018 $3.27
Dec2017 $3.76
Dec2016 $2.91
Dec2015 $1.56
Dec2014 $1.53
Dec2013 $1.53
Dec2012 $1.14
Dec2011 $0.54
Dec2010 $0.30
Dec2009 $0.37
Dec2008 $0.46
Dec2007 $0.53
Dec2006 $0.27
Dec2005 -$0.14
Dec2004 -$1.68
Dec2003 -$5.62
Dec2002 -$3.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.10
Dec2018 $2.98
Dec2017 $2.65
Dec2016 $1.97
Dec2015 $1.42
Dec2014 $1.24
Dec2013 $0.99
Dec2012 $0.66
Dec2011 $0.43
Dec2010 $0.38
Dec2009 $0.38
Dec2008 $0.22
Dec2007 -$0.38
Dec2006 -$1.29
Dec2005 -$2.13
Dec2004 -$2.83
Dec2003 -$2.90

Recommended Reading:

Other ModernGraham posts about the company

Extra Space Storage Inc Valuation – June 2018 $EXR
Extra Space Storage Inc Valuation – Initial Coverage $EXR

Other ModernGraham posts about related companies

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
Host Hotels & Resorts Inc Valuation – February 2019 $HST
Vornado Realty Trust Valuation – January 2019 $VNO
Public Storage Valuation – January 2019 $PSA

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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