First Industrial Realty Trust Inc Valuation – Initial Coverage $FR

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 Undervalued Stocks for the Enterprising Investor – August 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 First Industrial Realty Trust Inc (FR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): First Industrial Realty Trust, Inc. is a real estate investment trust (REIT). The Trust is a self-administered real estate company, which owns, manages, acquires, sells, develops and redevelops industrial real estate. As of December 31, 2016, the Company’s in-service portfolio consisted of 215 light industrial properties, 53 research and development (R&D)/flex properties, 167 bulk warehouse properties and 100 regional warehouse properties containing an aggregate of approximately 62.2 million square feet of gross leasable area (GLA) located in 23 states. The Company’s in-service portfolio includes all properties that have reached stabilized occupancy, developed and redeveloped properties and acquired properties that are occupied at acquisition or one year from the acquisition date. The Company’s operations are conducted primarily through the First Industrial, L.P. (the Operating Partnership), of which the Company is the sole general partner.

FR Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FR – September 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 $3,723,584,300 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 Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -175.29% Fail
6. Moderate PEmg Ratio PEmg < 20 40.49 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.76 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 0.65 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -25.34 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 $0.77
MG Growth Estimate 15.00%
MG Value $29.54
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $11.13
MG Value based on 0% Growth $6.52
Market Implied Growth Rate 16.00%
Current Price $31.07
% of Intrinsic Value 105.17%

First Industrial Realty 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, insufficient earnings stability or growth 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 Fairly Valued after growing its EPSmg (normalized earnings) from $-0.54 in 2013 to an estimated $0.77 for 2017.  This level of demonstrated earnings growth supports the market’s implied estimate of 16% 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 First Industrial Realty Trust, Inc. revealed the company was trading above its Graham Number of $14.24.  The company pays a dividend of $0.76 per share, for a yield of 2.4%, putting it among the best dividend paying stocks today.  Its PEmg (price over earnings per share – ModernGraham) was 40.49, which was below the industry average of 51.63, 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 $-12.21.

First Industrial Realty 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) -$12.21
Graham Number $14.24
PEmg 40.49
Current Ratio 0.65
PB Ratio 2.76
Current Dividend $0.76
Dividend Yield 2.45%
Number of Consecutive Years of Dividend Growth 4


Useful Links:

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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2017
Total Current Assets $97,252,000
Total Current Liabilities $150,145,000
Long-Term Debt $1,340,541,000
Total Assets $2,863,963,000
Intangible Assets $29,670,000
Total Liabilities $1,535,802,000
Shares Outstanding (Diluted Average) 117,779,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.85
Dec2016 $1.05
Dec2015 $0.66
Dec2014 $0.42
Dec2013 $0.24
Dec2012 -$0.24
Dec2011 -$0.34
Dec2010 -$3.53
Dec2009 -$0.28
Dec2008 $0.41
Dec2007 $2.99
Dec2006 $2.04
Dec2005 $1.80
Dec2004 $2.17
Dec2003 $2.43
Dec2002 $2.39
Dec2001 $2.24
Dec2000 $2.21
Dec1999 $2.41
Dec1998 $1.20
Dec1997 $1.26

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.77
Dec2016 $0.63
Dec2015 $0.33
Dec2014 -$0.12
Dec2013 -$0.54
Dec2012 -$0.89
Dec2011 -$0.86
Dec2010 -$0.63
Dec2009 $1.01
Dec2008 $1.73
Dec2007 $2.35
Dec2006 $2.08
Dec2005 $2.13
Dec2004 $2.30
Dec2003 $2.35
Dec2002 $2.24
Dec2001 $2.06

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

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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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