Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – February 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 Kimco Realty Corp (KIM) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): Kimco Realty Corporation (Kimco) is a self-administered real estate investment trust (REIT), which owns and operates neighborhood and community shopping centers. The Company had interests in approximately 754 shopping center properties, aggregating 109.5 million square feet of gross leasable area (GLA), and 533 other property interests, primarily through the Company’s preferred equity investments and other real estate investments, totaling approximately 11.7 million square feet of GLA, for a total of 1,287 properties aggregating 121.2 million square feet of GLA, located in 41 states in the United States and also in Puerto Rico, Canada, Mexico and Chile. The Company’s investment strategy is to be the owner and operator of neighborhood and community shopping centers through investments primarily in the United States. The Company’s tenants include TJX Companies, The Home Depot, Wal-Mart, Kohl’s and Bed Bath.
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Downloadable PDF version of this valuation:
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 | $10,968,351,297 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 3.44 | Pass | |
| 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 | 92.54% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 20.45 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 2.17 | 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 | 3.44 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 13.39 | 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 | $1.30 |
| MG Growth Estimate | 15.00% |
| MG Value | $49.92 |
| Opinion | Undervalued |
| MG Grade | B |
| MG Value based on 3% Growth | $18.80 |
| MG Value based on 0% Growth | $11.02 |
| Market Implied Growth Rate | 5.98% |
| Current Price | $26.52 |
| % of Intrinsic Value | 53.12% |
Kimco Realty Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.29 in 2012 to an estimated $1.30 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 5.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. Kimco Realty Corp performs fairly well in the ModernGraham grading system, scoring a B.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$14.29 |
| Graham Number | $20.30 |
| PEmg | 20.45 |
| Current Ratio | 3.44 |
| PB Ratio | 2.17 |
| Dividend Yield | 3.68% |
| Number of Consecutive Years of Dividend Growth | 6 |
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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 | Dec2015 |
| Total Current Assets | $396,175,000 |
| Total Current Liabilities | $115,182,000 |
| Long-Term Debt | $3,761,328,000 |
| Total Assets | $11,344,171,000 |
| Intangible Assets | $0 |
| Total Liabilities | $6,297,871,000 |
| Shares Outstanding (Diluted Average) | 412,851,000 |
Earnings Per Share History
| Next Fiscal Year Estimate | $1.50 |
| 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 |
| Dec1998 | $0.66 |
| Dec1997 | $0.59 |
| Dec1996 | $0.54 |
Earnings Per Share – ModernGraham History
| Next Fiscal Year Estimate | $1.30 |
| 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 |
| Dec2002 | $0.89 |
| Dec2001 | $0.81 |
| Dec2000 | $0.72 |
Recommended Reading:
Other ModernGraham posts about the company
Other ModernGraham posts about related companies
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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