REIT Stocks

Crown Castle International Corp Valuation – January 2019 $CCI

Company Profile (excerpt from Reuters): Crown Castle International Corp., incorporated on May 27, 2014, is a real estate investment trust (REIT), which owns, operates and leases shared wireless infrastructure that is geographically dispersed throughout the United States and Puerto Rico. The Company’s segments include towers and small cells. As of December 31, 2016, the Company had approximately 40,000 towers and other structures, such as rooftops (collectively towers) and approximately 26,500 route miles of fiber (collectively small cells, and together with towers, wireless infrastructure). The towers segment provides access, including space or capacity to its towers, which are geographically dispersed throughout the United States. The towers segment also reflects certain network services relating to its towers, consisting of site development services and installation services. As of December 31, 2016, the small cells segment provided access, including space or capacity, to the Company’s approximately 17,000 route miles of fiber primarily supporting small cell networks. The small cells segment also offers fiber-based solutions.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CCI – 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 $43,904,860,878 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.96 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 -389.19% Fail
6. Moderate PEmg Ratio PEmg < 20 68.28 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.55 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 0.96 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -296.60 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 $1.53
MG Growth Estimate 15.00%
MG Value $59.08
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $22.25
MG Value based on 0% Growth $13.04
Market Implied Growth Rate 29.89%
Current Price $104.78
% of Intrinsic Value 177.34%

CROWN CASTLE IN/SH SH 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 $0.54 in 2014 to an estimated $1.53 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 29.89% 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 CROWN CASTLE IN/SH SH revealed the company was trading above its Graham Number of $29.23. The company pays a dividend of $3.9 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 68.28, 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 $-45.91.

CROWN CASTLE IN/SH SH 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) -$45.91
Graham Number $29.23
PEmg 68.28
Current Ratio 0.96
PB Ratio 3.55
Current Dividend $3.90
Dividend Yield 3.72%
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $1,249,000,000
Total Current Liabilities $1,304,000,000
Long-Term Debt $16,313,000,000
Total Assets $32,644,000,000
Intangible Assets $15,694,000,000
Total Liabilities $20,349,000,000
Shares Outstanding (Diluted Average) 416,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.25
Dec2017 $1.01
Dec2016 $0.95
Dec2015 $4.42
Dec2014 $1.04
Dec2013 $0.26
Dec2012 $0.64
Dec2011 $0.52
Dec2010 -$1.16
Dec2009 -$0.47
Dec2008 -$0.25
Dec2007 -$0.87
Dec2006 -$0.30
Dec2005 -$2.06
Dec2004 $0.88
Dec2003 -$2.36
Dec2002 -$1.38
Dec2001 -$2.22
Dec2000 -$1.48
Dec1999 -$0.96
Dec1998 -$1.02

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.53
Dec2017 $1.63
Dec2016 $1.78
Dec2015 $1.92
Dec2014 $0.54
Dec2013 $0.18
Dec2012 $0.04
Dec2011 -$0.32
Dec2010 -$0.70
Dec2009 -$0.57
Dec2008 -$0.59
Dec2007 -$0.82
Dec2006 -$0.88
Dec2005 -$1.26
Dec2004 -$1.01
Dec2003 -$1.86
Dec2002 -$1.54

Recommended Reading:

Other ModernGraham posts about the company

Crown Castle International Corp Valuation – March 2018 $CCI
Crown Castle International Corp Valuation – June 2016 $CCI
21 Companies in the Spotlight This Week – 5/9/15
Crown Castle International Corporation Annual Valuation – 2015 $CCI
16 Companies in the Spotlight This Week – 4/26/14

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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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