REIT Stocks

Equinix Inc Valuation – June 2018 $EQIX

Company Profile (excerpt from Reuters): Equinix, Inc. (Equinix), incorporated on June 22, 1998, operates as a real estate investment trust (REIT). The Company connects various companies directly to their customers and partners inside interconnected data centers. The Company operates through three segments: Americas, EMEA and Asia-Pacific. The Company’s platform Equinix, combines a global footprint of International Business Exchange (IBX) data centers, a range of interconnection solutions, ecosystems and support. Its customers include carriers, mobile and other bandwidth providers, cloud and information technology (IT) services providers, content providers, financial companies and enterprises. It provides each customer access to a choice of business partners and solutions based on their colocation, interconnection and managed IT service needs. Its colocation offerings include operations space, storage space, cabinets and power for customers’ colocation needs inside Equinix’s IBX data centers. Its interconnection offerings include Equinix Cloud Exchange, which enables simultaneous, direct and secure connections to multiple clouds from a single port; Equinix Performance Hub, which takes enterprise IT inside any one of its global data centers, and Equinix Data Hub, which enables secure, compliant access to business-critical data and analytics wherever users are located around the globe.

EQIX Chart

EQIX data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of EQIX – June 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 $33,281,682,400 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.36 Pass
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 79.58% Pass
6. Moderate PEmg Ratio PEmg < 20 186.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.67 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 2.36 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 5.49 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 $2.24
MG Growth Estimate 15.00%
MG Value $86.19
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $32.46
MG Value based on 0% Growth $19.03
Market Implied Growth Rate 89.24%
Current Price $418.57
% of Intrinsic Value 485.64%

Equinix Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability 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 net 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 $-0.3 in 2014 to an estimated $2.24 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 89.24% 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 Equinix Inc revealed the company was trading above its Graham Number of $75.84. The company pays a dividend of $8 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 186.97, which was above the industry average of 49.08. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-123.77.

Equinix Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$123.77
Graham Number $75.84
PEmg 186.97
Current Ratio 2.36
PB Ratio 4.67
Current Dividend $8.00
Dividend Yield 1.91%
Number of Consecutive Years of Dividend Growth 3

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 3/1/2018
Total Current Assets $2,943,484,000
Total Current Liabilities $1,246,475,000
Long-Term Debt $9,317,149,000
Total Assets $19,941,928,000
Intangible Assets $6,841,763,000
Total Liabilities $12,801,377,000
Shares Outstanding (Diluted Average) 79,649,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.95
Dec2017 $3.00
Dec2016 $1.79
Dec2015 $3.21
Dec2014 -$4.96
Dec2013 $1.89
Dec2012 $2.83
Dec2011 $1.74
Dec2010 $0.82
Dec2009 $1.75
Dec2008 $2.79
Dec2007 -$0.16
Dec2006 -$0.22
Dec2005 -$1.78
Dec2004 -$3.87
Dec2003 -$8.76
Dec2002 -$7.23
Dec2001 -$76.62
Dec2000 -$111.18
Dec1999 -$159.11

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.24
Dec2017 $1.58
Dec2016 $0.90
Dec2015 $0.62
Dec2014 -$0.30
Dec2013 $1.96
Dec2012 $1.99
Dec2011 $1.51
Dec2010 $1.26
Dec2009 $1.15
Dec2008 $0.35
Dec2007 -$1.57
Dec2006 -$2.97
Dec2005 -$9.45
Dec2004 -$22.70
Dec2003 -$45.60
Dec2002 -$66.29

Recommended Reading:

Other ModernGraham posts about the company

Equinix Inc Valuation – July 2017 $EQIX
5 of the Worst Stocks to Invest In – December 2016
Equinix Inc Valuation – August 2016 $EQIX
Equinix Inc. Analysis – Initial Coverage $EQIX

Other ModernGraham posts about related companies

Essex Property Trust Inc Valuation – June 2018 $ESS
Federal Realty Investment Trust Valuation – June 2018 $FRT
UDR Inc Valuation – June 2018 $UDR
Mid-America Apartment Communities Inc Valuation – June 2018 $MAA
Extra Space Storage Inc Valuation – June 2018 $EXR
Digital Realty Trust Inc Valuation – June 2018 $DLR
Equity Residential Valuation – June 2018 $EQR
Prologis Inc Valuation – May 2018 $PLD
Duke Realty Corp Valuation – Initial Coverage $DRE
Realty Income Corp Valuation – April 2018 $O

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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top