Apartment Investment & Management Co Valuation – July 2016 $AIV
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 - June 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 Apartment Investment & Management Co (AIV) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): Apartment Investment and Management Company (Aimco) is a self-administered and self-managed real estate investment trust. The Company, through its subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, holds the ownership interests in the Aimco Operating Partnership. Its segments include conventional real estate and affordable real estate. Its conventional real estate segment includes over 140 apartment communities with over 40,460 apartment homes. Its affordable real estate operations include approximately 60 apartment communities with over 8,680 apartment homes. The affordable segment consists of apartment communities, which it classifies as Affordable Same Store or Other Affordable. It owns and operates a portfolio of market-rate apartment communities. Aimco Operating Partnership conducts its business, which is focused on the ownership, management, redevelopment and limited development of apartment communities located in the coastal and job growth markets of the United States.
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Downloadable PDF version of this valuation:
ModernGraham Valuation of AIV – July 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 | $7,090,925,666 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 0.38 | 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 | 261.73% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 24.66 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 4.33 | 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 | 0.38 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | -15.75 | 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 | $1.80 |
| MG Growth Estimate | 15.00% |
| MG Value | $69.48 |
| Opinion | Undervalued |
| MG Grade | C |
| MG Value based on 3% Growth | $26.17 |
| MG Value based on 0% Growth | $15.34 |
| Market Implied Growth Rate | 8.08% |
| Current Price | $44.51 |
| % of Intrinsic Value | 64.06% |
Apartment Investment and Management Co 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. 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 Undervalued after growing its EPSmg (normalized earnings) from $-0.18 in 2012 to an estimated $1.8 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 8.08% 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.
Apartment Investment and Management Co receives an average overall rating in the ModernGraham grading system, scoring a C.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$28.08 |
| Graham Number | $21.75 |
| PEmg | 24.66 |
| Current Ratio | 0.38 |
| PB Ratio | 4.33 |
| Current Dividend | $1.23 |
| Dividend Yield | 2.76% |
| 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 | 3/1/2016 |
| Total Current Assets | $154,612,000 |
| Total Current Liabilities | $403,357,000 |
| Long-Term Debt | $3,917,590,000 |
| Total Assets | $6,142,213,000 |
| Intangible Assets | $0 |
| Total Liabilities | $4,539,051,000 |
| Shares Outstanding (Diluted Average) | 156,117,000 |
Earnings Per Share History
| Next Fiscal Year Estimate | $2.28 |
| Dec2015 | $1.52 |
| Dec2014 | $2.06 |
| Dec2013 | $1.40 |
| Dec2012 | $0.61 |
| Dec2011 | -$0.86 |
| Dec2010 | -$1.08 |
| Dec2009 | -$1.00 |
| Dec2008 | $2.98 |
| Dec2007 | -$0.36 |
| Dec2006 | $1.00 |
| Dec2005 | -$0.18 |
| Dec2004 | $1.88 |
| Dec2003 | $0.70 |
| Dec2002 | $0.87 |
| Dec2001 | $0.23 |
| Dec2000 | $0.52 |
| Dec1999 | $0.38 |
| Dec1998 | $0.80 |
| Dec1997 | $1.08 |
| Dec1996 | $1.05 |
Earnings Per Share – ModernGraham History
| Next Fiscal Year Estimate | $1.80 |
| Dec2015 | $1.36 |
| Dec2014 | $1.00 |
| Dec2013 | $0.25 |
| Dec2012 | -$0.18 |
| Dec2011 | -$0.40 |
| Dec2010 | -$0.01 |
| Dec2009 | $0.51 |
| Dec2008 | $1.20 |
| Dec2007 | $0.41 |
| Dec2006 | $0.81 |
| Dec2005 | $0.71 |
| Dec2004 | $1.05 |
| Dec2003 | $0.61 |
| Dec2002 | $0.56 |
| Dec2001 | $0.47 |
| Dec2000 | $0.65 |
Recommended Reading:
Other ModernGraham posts about the company
| Apartment Investment and Management Company Annual Valuation – 2015 $AIV | |
| 14 Companies in the Spotlight This Week – 1/4/14 | |
| ModernGraham Valuation: Apartment Investment & Management Co. (AIV) |
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.
