Apartment Investment & Management Co Valuation – March 2018 $AIV

Company Profile (excerpt from Reuters): Apartment Investment and Management Company (Aimco), incorporated on January 10, 1994, is a self-administered and self-managed real estate investment trust (REIT). Aimco, through its subsidiaries, AIMCO-GP, Inc. and AIMCO-LP Trust, holds the ownership interests in the Aimco Operating Partnership. The Company operates through two segments: conventional real estate and affordable real estate. As of December 31, 2016, its real estate portfolio consisted of 189 apartment communities with 46,311 apartment homes. Aimco Operating Partnership conducts the Company’s 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 – March 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 $6,310,517,506 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.66 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 -257.31% Fail
6. Moderate PEmg Ratio PEmg < 20 28.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.78 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 0.66 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -51.84 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $1.39
MG Growth Estimate 6.02%
MG Value $28.66
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $20.23
MG Value based on 0% Growth $11.86
Market Implied Growth Rate 10.13%
Current Price $40.11
% of Intrinsic Value 139.96%

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 or 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, and the lack of earnings stability 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 growing its EPSmg (normalized earnings) from $1 in 2014 to an estimated $1.39 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.13% 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 Apartment Investment and Management Co revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.44 per share, for a yield of 3.6%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.75, which was below the industry average of 42.02, 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 $-27.17.

Apartment Investment and Management Co 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) -$27.17
Graham Number $0.00
PEmg 28.75
Current Ratio 0.66
PB Ratio 3.78
Current Dividend $1.44
Dividend Yield 3.59%
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $153,958,000
Total Current Liabilities $232,839,000
Long-Term Debt $4,088,911,000
Total Assets $6,079,040,000
Intangible Assets $38,701,000
Total Liabilities $4,415,896,000
Shares Outstanding (Diluted Average) 156,880,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.01
Dec2017 $1.96
Dec2016 $2.67
Dec2015 $1.52
Dec2014 $2.06
Dec2013 $1.40
Dec2012 $0.61
Dec2011 -$0.86
Dec2010 -$1.08
Dec2009 -$1.00
Dec2008 $3.96
Dec2007 -$0.26
Dec2006 $0.95
Dec2005 -$0.12
Dec2004 $1.28
Dec2003 $0.67
Dec2002 $0.87
Dec2001 $0.23
Dec2000 $0.52
Dec1999 $0.38
Dec1998 $0.80

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.39
Dec2017 $2.04
Dec2016 $1.93
Dec2015 $1.36
Dec2014 $1.00
Dec2013 $0.25
Dec2012 -$0.11
Dec2011 -$0.26
Dec2010 $0.19
Dec2009 $0.79
Dec2008 $1.51
Dec2007 $0.36
Dec2006 $0.69
Dec2005 $0.57
Dec2004 $0.84
Dec2003 $0.60
Dec2002 $0.56

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)

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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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