REIT Stocks

CoreSite Realty Corp Valuation – August 2018 $COR

Company Profile (excerpt from Reuters): CoreSite Realty Corporation (CoreSite), incorporated on February 17, 2010, is an integrated, self-administered and self-managed real estate investment trust (REIT). The Company, through its controlling interest in CoreSite, L.P., is engaged in the business of ownership, acquisition, construction and operation of data centers across a range of markets in the United States, including the Northern Virginia (including Washington District of Columbia), New York and San Francisco Bay areas, Chicago, Los Angeles, Boston, Miami and Denver. The enterprises, network operators, cloud providers and supporting service providers choose CoreSite to connect and protect their data, applications and computing workloads. As of December 31, 2016, the Company had delivered data center and interconnection solutions to customer ecosystem across eight North American markets. In addition to geographic markets, the Company groups its customers into various industry verticals, including enterprises; cloud and information technology (IT) service providers, and networks and mobility.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of COR – August 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 $5,500,648,213 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.28 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 -1434.15% Fail
6. Moderate PEmg Ratio PEmg < 20 68.17 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.17 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 0.28 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.64 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 $1.68
MG Growth Estimate 15.00%
MG Value $64.55
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $24.31
MG Value based on 0% Growth $14.25
Market Implied Growth Rate 29.84%
Current Price $114.30
% of Intrinsic Value 177.07%

CoreSite Realty Corp 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 Overvalued after growing its EPSmg (normalized earnings) from $0.35 in 2014 to an estimated $1.68 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 29.84% 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 CoreSite Realty Corp revealed the company was trading above its Graham Number of $19.65. The company pays a dividend of $3.58 per share, for a yield of 3.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 68.17, which was above the industry average of 47.15. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-39.39.

CoreSite Realty Corp 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) -$39.39
Graham Number $19.65
PEmg 68.17
Current Ratio 0.28
PB Ratio 10.17
Current Dividend $3.58
Dividend Yield 3.13%
Number of Consecutive Years of Dividend Growth 8

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 6/1/2018
Total Current Assets $34,643,000
Total Current Liabilities $123,164,000
Long-Term Debt $1,030,536,000
Total Assets $1,767,098,000
Intangible Assets $66,570,000
Total Liabilities $1,382,498,000
Shares Outstanding (Diluted Average) 34,220,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.09
Dec2017 $1.84
Dec2016 $1.54
Dec2015 $1.03
Dec2014 $0.66
Dec2013 $0.49
Dec2012 $0.22
Dec2011 -$0.24
Dec2010 -$0.17

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.68
Dec2017 $1.35
Dec2016 $1.00
Dec2015 $0.63
Dec2014 $0.35
Dec2013 $0.15
Dec2012 -$0.02
Dec2011 -$0.13
Dec2010 -$0.06

Recommended Reading:

Other ModernGraham posts about the company

CoreSite Realty Corp Valuation – Initial Coverage $COR

Other ModernGraham posts about related companies

Tanger Factory Outlet Centers Inc Valuation – July 2018 $SKT
Capstead Mortgage Corp Valuation – July 2018 $CMO
Mack-Cali Realty Corp Valuation – July 2018 $CLI
Chesapeake Lodging Trust Valuation – July 2018 $CHSP
Alexander & Baldwin Inc Valuation – July 2018 $ALEX
Summit Hotel Properties Inc Valuation – July 2018 $INN
Sabra Health Care REIT Inc Valuation – July 2018 $SBRA
National Retail Properties Inc Valuation – July 2018 $NNN
Equinix Inc Valuation – June 2018 $EQIX
Kimco Realty Corp Valuation – June 2018 $KIM

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