Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017. By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Tanger Factory Outlet Centers Inc (SKT) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): Tanger Factory Outlet Centers, Inc. is a self-administered and self-managed real estate investment trust (REIT). The Company focuses on developing, acquiring, owning, operating and managing outlet shopping centers in the United States and Canada. The Company’s consolidated portfolio consists of approximately 34 outlet centers, with a total gross leasable area of approximately 11.7 million square feet. The Company also has partial ownership interests in approximately nine outlet centers totaling approximately 2.7 million square feet, including four outlet centers in Canada. Its centers and other assets are held by, and all of the Company’s operations are conducted by, Tanger Properties Limited Partnership (Operating Partnership) and subsidiaries. The Company’s consolidated outlet centers range in size from 82,161 to 749,074 square feet and are located at least 10 miles from department stores and manufacturer-owned, full-price retail stores.
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Downloadable PDF version of this valuation:
ModernGraham Valuation of SKT – January 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 | $3,376,016,739 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 0.37 | 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 | 258.27% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 22.12 | 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 | 0.37 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | -34.70 | 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 | $1.60 |
| MG Growth Estimate | 15.00% |
| MG Value | $61.57 |
| Opinion | Undervalued |
| MG Grade | B- |
| MG Value based on 3% Growth | $23.19 |
| MG Value based on 0% Growth | $13.59 |
| Market Implied Growth Rate | 6.81% |
| Current Price | $35.37 |
| % of Intrinsic Value | 57.44% |
Tanger Factory Outlet Centers 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 Undervalued after growing its EPSmg (normalized earnings) from $0.51 in 2012 to an estimated $1.6 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.81% 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 above the price.
At the time of valuation, further research into Tanger Factory Outlet Centers Inc. revealed the company was trading above its Graham Number of $17.76. The company pays a dividend of $1.22 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 22.12, which was below the industry average of 31.91, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-19.46.
Tanger Factory Outlet Centers Inc. performs fairly well in the ModernGraham grading system, scoring a B-.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$19.46 |
| Graham Number | $17.76 |
| PEmg | 22.12 |
| Current Ratio | 0.37 |
| PB Ratio | 5.05 |
| Current Dividend | $1.22 |
| Dividend Yield | 3.45% |
| Number of Consecutive Years of Dividend Growth | 20 |
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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 | $28,838,000 |
| Total Current Liabilities | $78,542,000 |
| Long-Term Debt | $1,724,646,000 |
| Total Assets | $2,560,919,000 |
| Intangible Assets | $0 |
| Total Liabilities | $1,890,677,000 |
| Shares Outstanding (Diluted Average) | 95,672,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $2.01 |
| Dec2015 | $2.20 |
| Dec2014 | $0.77 |
| Dec2013 | $1.13 |
| Dec2012 | $0.57 |
| Dec2011 | $0.52 |
| Dec2010 | $0.32 |
| Dec2009 | $0.72 |
| Dec2008 | $0.31 |
| Dec2007 | $0.36 |
| Dec2006 | $0.52 |
| Dec2005 | $0.08 |
| Dec2004 | $0.13 |
| Dec2003 | $0.30 |
| Dec2002 | $0.27 |
| Dec2001 | $0.17 |
| Dec2000 | $0.08 |
| Dec1999 | $0.44 |
| Dec1998 | $0.31 |
| Dec1997 | $0.39 |
| Dec1996 | $0.34 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $1.60 |
| Dec2015 | $1.28 |
| Dec2014 | $0.76 |
| Dec2013 | $0.72 |
| Dec2012 | $0.51 |
| Dec2011 | $0.47 |
| Dec2010 | $0.44 |
| Dec2009 | $0.47 |
| Dec2008 | $0.32 |
| Dec2007 | $0.31 |
| Dec2006 | $0.28 |
| Dec2005 | $0.17 |
| Dec2004 | $0.20 |
| Dec2003 | $0.24 |
| Dec2002 | $0.23 |
| Dec2001 | $0.23 |
| Dec2000 | $0.28 |
Recommended Reading:
Other ModernGraham posts about the company
None. This is the first time ModernGraham has covered the company.
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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.
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