Welltower Inc Valuation – January 2019 $WELL

Company Profile (excerpt from Reuters):Welltower Inc., incorporated on April 4, 1985, invests with seniors housing operators, post-acute providers and health systems to fund real estate and infrastructure. The Company invests in seniors housing and healthcare real estate. It operates in three segments: triple-net, seniors housing operating and outpatient medical. Welltower, a real estate investment trust (REIT), owns interests in properties concentrated in markets in the United States, Canada and the United Kingdom, consisting of seniors housing and post-acute communities, and outpatient medical properties. The Company’s primary objectives are to protect stockholder capital and enhance stockholder value.


Downloadable PDF version of this valuation:

ModernGraham Valuation of WELL – 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 $26,411,528,722 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.23 Fail
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 91.93% Pass
6. Moderate PEmg Ratio PEmg < 20 34.98 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.72 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 1.23 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 54.93 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 $2.01
MG Growth Estimate 15.00%
MG Value $77.39
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $29.15
MG Value based on 0% Growth $17.09
Market Implied Growth Rate 13.24%
Current Price $70.31
% of Intrinsic Value 90.86%

Welltower 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, high PEmg ratio. 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 $0.93 in 2014 to an estimated $2.01 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 13.24% 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 within a margin of safety relative to the price.

At the time of valuation, further research into Welltower Inc revealed the company was trading above its Graham Number of $41.84. The company pays a dividend of $3.48 per share, for a yield of 4.9%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 34.98, 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 $-36.48.

Welltower 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) -$36.48
Graham Number $41.84
PEmg 34.98
Current Ratio 1.23
PB Ratio 1.72
Current Dividend $3.48
Dividend Yield 4.95%
Number of Consecutive Years of Dividend Growth 10

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 9/1/2018
Total Current Assets $1,319,537,000
Total Current Liabilities $1,074,994,000
Long-Term Debt $13,432,683,000
Total Assets $30,249,119,000
Intangible Assets $68,321,000
Total Liabilities $14,979,918,000
Shares Outstanding (Diluted Average) 374,487,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.11
Dec2017 $1.26
Dec2016 $2.81
Dec2015 $2.34
Dec2014 $1.45
Dec2013 $0.28
Dec2012 $0.98
Dec2011 $0.90
Dec2010 $0.83
Dec2009 $1.49
Dec2008 $2.76
Dec2007 $1.43
Dec2006 $1.31
Dec2005 $1.15
Dec2004 $1.39
Dec2003 $1.60
Dec2002 $1.48
Dec2001 $1.52
Dec2000 $1.91
Dec1999 $2.21
Dec1998 $2.24

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.01
Dec2017 $1.85
Dec2016 $1.95
Dec2015 $1.41
Dec2014 $0.93
Dec2013 $0.74
Dec2012 $1.12
Dec2011 $1.28
Dec2010 $1.50
Dec2009 $1.77
Dec2008 $1.81
Dec2007 $1.35
Dec2006 $1.33
Dec2005 $1.37
Dec2004 $1.52
Dec2003 $1.63
Dec2002 $1.72

Recommended Reading:

Other ModernGraham posts about the company

Welltower Inc Valuation – March 2018 $WELL

Other ModernGraham posts about related companies

Boston Properties Inc Valuation – January 2019 $BXP
AvalonBay Communities Inc Valuation – December 2018 $AVB
Weyerhaeuser Co Valuation – December 2018 $WY
Alexandria Real Estate Equities Inc Valuation – November 2018 $ARE
LaSalle Hotel Properties Valuation – September 2018 $LHO
Cousins Properties Inc Valuation – September 2018 $CUZ
Cominar Real Estate Investment Trust Valuation – September 2018 $TSE:CUF.UN
CareTrust REIT Inc Valuation – August 2018 $CTRE
Lamar Advertising Co Valuation – August 2018 $LAMR
Uniti Group Inc Valuation – August 2018 $UNIT


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.