REIT Stocks

Boston Properties Inc Valuation – January 2019 $BXP

Company Profile (excerpt from Reuters): Boston Properties, Inc., incorporated on March 24, 1997, is a real estate investment trust. The Company is an owner and developer of office properties in the United States. The Company’s segments by geographic area are Boston, New York, San Francisco and Washington, DC. Its segments by property type include Office, Residential and Hotel. As of July 23, 2018, the Company owned or had interests in over 175 commercial real estate properties, aggregating approximately 50.3million net rentable square feet of primarily Class A office properties, including eight properties under construction/redevelopment totaling approximately 4.0 million net rentable square feet. As of July 23, 2018, its properties consisted of 167 Office properties (including nine properties under construction/redevelopment); one hotel; five retail properties, and six residential properties (including four under construction).

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of BXP – January 2019

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 $17,048,675,661 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.90 Pass
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 102.10% Pass
6. Moderate PEmg Ratio PEmg < 20 33.85 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.08 Pass
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 2.90 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 10.00 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 $3.26
MG Growth Estimate 1.60%
MG Value $38.14
Opinion Overvalued
MG Grade B-
MG Value based on 3% Growth $47.29
MG Value based on 0% Growth $27.72
Market Implied Growth Rate 12.67%
Current Price $110.39
% of Intrinsic Value 289.40%

Boston Properties, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.95 in 2014 to an estimated $3.26 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 12.67% 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 Boston Properties, Inc. revealed the company was trading above its Graham Number of $52.98. The company pays a dividend of $3.05 per share, for a yield of 2.8%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 33.85, which was below the industry average of 70.5, 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 $-66.39.

Boston Properties, Inc. performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$66.39
Graham Number $52.98
PEmg 33.94
Current Ratio 2.90
PB Ratio 2.09
Current Dividend $3.05
Dividend Yield 2.76%
Number of Consecutive Years of Dividend Growth 2

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,662,003,000
Total Current Liabilities $573,389,000
Long-Term Debt $10,889,702,000
Total Assets $20,137,498,000
Intangible Assets $0
Total Liabilities $11,931,524,000
Shares Outstanding (Diluted Average) 154,678,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.43
Dec2017 $2.93
Dec2016 $3.26
Dec2015 $3.72
Dec2014 $2.83
Dec2013 $4.86
Dec2012 $1.92
Dec2011 $1.86
Dec2010 $1.14
Dec2009 $1.76
Dec2008 $0.87
Dec2007 $10.94
Dec2006 $7.46
Dec2005 $3.86
Dec2004 $2.61
Dec2003 $3.65
Dec2002 $4.50
Dec2001 $2.19
Dec2000 $2.05
Dec1999 $1.71
Dec1998 $1.52

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.26
Dec2017 $3.29
Dec2016 $3.42
Dec2015 $3.35
Dec2014 $2.95
Dec2013 $2.77
Dec2012 $1.66
Dec2011 $2.12
Dec2010 $2.98
Dec2009 $4.26
Dec2008 $5.39
Dec2007 $7.00
Dec2006 $4.82
Dec2005 $3.46
Dec2004 $3.17
Dec2003 $3.24
Dec2002 $2.82

Recommended Reading:

Other ModernGraham posts about the company

Boston Properties Inc Valuation – March 2018 $BXP
9 Best Stocks For Value Investors This Week – 6/24/16
Boston Properties Inc Valuation – June 2016 $BXP
Boston Properties Inc. Valuation – November 2015 Update $BXP
Boston Properties Inc. Analysis – August 2015 Update $BXP

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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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