Extra Space Storage Inc Valuation – March 2019 #EXR

Company Profile (excerpt from Reuters): Extra Space Storage Inc., incorporated on April 30, 2004, is a self-administered and self-managed real estate investment trust (REIT). The Company owns, operates, manages, acquires, develops and redevelops self-storage properties located throughout the United States. The Company operates through three segments: rental operations; tenant reinsurance, and property management, acquisition and development. The Company’s rental operations activities include rental operations of stores in which it has an ownership interest. The Tenant reinsurance activities include the reinsurance of risks relating to the loss of goods stored by tenants in its stores. The Company’s property management, acquisition and development activities include managing, acquiring, developing and selling stores.


Downloadable PDF version of this valuation:

ModernGraham Valuation of EXR – March 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 $12,701,894,064 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.50 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 403.54% Pass
6. Moderate PEmg Ratio PEmg < 20 32.23 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.79 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 0.50 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -65.05 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 $3.10
MG Growth Estimate 15.00%
MG Value $119.20
Opinion Fairly Valued
MG Grade C-
MG Value based on 3% Growth $44.89
MG Value based on 0% Growth $26.32
Market Implied Growth Rate 11.86%
Current Price $99.78
% of Intrinsic Value 83.71%

Extra Space Storage, 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 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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.42 in 2015 to an estimated $3.1 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 11.86% 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 Extra Space Storage, Inc. revealed the company was trading above its Graham Number of $35.52. The company pays a dividend of $3.36 per share, for a yield of 3.4%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 32.23, which was below the industry average of 61.92, 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 $-37.35.

Extra Space Storage, 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) -$37.35
Graham Number $35.52
PEmg 32.23
Current Ratio 0.50
PB Ratio 4.79
Current Dividend $3.36
Dividend Yield 3.37%
Number of Consecutive Years of Dividend Growth 9

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $72,690,000
Total Current Liabilities $146,658,000
Long-Term Debt $4,811,515,000
Total Assets $7,847,978,000
Intangible Assets $0
Total Liabilities $5,062,556,000
Shares Outstanding (Diluted Average) 133,589,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.94
Dec2018 $3.27
Dec2017 $3.76
Dec2016 $2.91
Dec2015 $1.56
Dec2014 $1.53
Dec2013 $1.53
Dec2012 $1.14
Dec2011 $0.54
Dec2010 $0.30
Dec2009 $0.37
Dec2008 $0.46
Dec2007 $0.53
Dec2006 $0.27
Dec2005 -$0.14
Dec2004 -$1.68
Dec2003 -$5.62
Dec2002 -$3.84

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.10
Dec2018 $2.98
Dec2017 $2.65
Dec2016 $1.97
Dec2015 $1.42
Dec2014 $1.24
Dec2013 $0.99
Dec2012 $0.66
Dec2011 $0.43
Dec2010 $0.38
Dec2009 $0.38
Dec2008 $0.22
Dec2007 -$0.38
Dec2006 -$1.29
Dec2005 -$2.13
Dec2004 -$2.83
Dec2003 -$2.90

Recommended Reading:

Other ModernGraham posts about the company

Extra Space Storage Inc Valuation – June 2018 $EXR
Extra Space Storage Inc Valuation – Initial Coverage $EXR

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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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