U.S. Markets close in 3 hrs 48 mins

How Should You Analyze REIT Stock Franklin Street Properties Corp. (NYSEMKT:FSP)?

Simply Wall St

Franklin Street Properties Corp. is a US$820m small-cap, real estate investment trust (REIT) based in Wakefield, United States. REITs own and operate income-generating property and adhere to a different set of regulations. This impacts how FSP’s business operates and also how we should analyse its stock. Below, I'll look at a few important metrics to keep in mind as part of your research on FSP.

Check out our latest analysis for Franklin Street Properties

A common financial term REIT investors should know is Funds from Operations, or FFO for short, which is a REIT's main source of income from its portfolio of property, such as rent. FFO is a cleaner and more representative figure of how much FSP actually makes from its day-to-day operations, compared to net income, which can be affected by one-off activities or non-cash items such as depreciation. For FSP, its FFO of US$80m makes up 50% of its gross profit, which means over a third of its earnings are high-quality and recurring.

AMEX:FSP Historical Debt, April 24th 2019

Robust financial health can be measured using a common metric in the REIT investing world, FFO-to-debt. The calculation roughly estimates how long it will take for FSP to repay debt on its balance sheet, which gives us insight into how much risk is associated with having that level of debt on its books. With a ratio of 8.1%, the credit rating agency Standard & Poor would consider this as aggressive risk. This would take FSP 12.32 years to pay off using just operating income, which is a long time, and risk increases with time. But realistically, companies have many levers to pull in order to pay back their debt, beyond operating income alone.

I also look at FSP's interest coverage ratio, which demonstrates how many times its earnings can cover its yearly interest expense. This is similar to the concept above, but looks at the upcoming obligations. The ratio is typically calculated using EBIT, but for a REIT stock, it's better to use FFO divided by net interest. With an interest coverage ratio of 2.09x, FSP is not generating an appropriate amount of cash from its borrowings. Typically, a ratio of greater than 3x is seen as safe.

In terms of valuing FSP, FFO can also be used as a form of relative valuation. Instead of the P/E ratio, P/FFO is used instead, which is very common for REIT stocks. FSP's price-to-FFO is 10.23x, compared to the long-term industry average of 16.5x, meaning that it is undervalued.

Next Steps:

In this article, I've taken a look at Funds from Operations using various metrics, but it is certainly not sufficient to derive an investment decision based on this value alone. Franklin Street Properties can bring about diversification for your portfolio, but before you decide to invest, take a look at the other aspects you must consider before investing:

  1. Future Outlook: What are well-informed industry analysts predicting for FSP’s future growth? Take a look at our free research report of analyst consensus for FSP’s outlook.
  2. Valuation: What is FSP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether FSP is currently mispriced by the market.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

  • Typical Retirement Savings By Age Groups: Are Yours Bigger?
    Business
    Investor's Business Daily

    Typical Retirement Savings By Age Groups: Are Yours Bigger?

    Active savers — in this case, Americans who own an IRA and-or a 401(k) account in the custody of Fidelity Investments — had savings for retirement of $215,400 as of Sept. according to new data IBD has obtained from Fidelity. In contrast, the average for all working-age families is shockingly low.

  • Business
    MarketWatch

    Dow down 414 points on losses for American Express, UnitedHealth stocks

    Dragged down by losses for shares of American Express and UnitedHealth, the Dow Jones Industrial Average is in a selloff Monday morning. The Dow (DJIA) was most recently trading 414 points lower (-1.4%), as shares of American Express (AXP) and UnitedHealth (UNH) have contributed to the blue-chip gauge's intraday decline. American Express's shares have fallen $6.09 (4.5%) while those of UnitedHealth are off $9.60 (3.3%), combining for a roughly 106-point drag on the Dow.

  • Analysts: 2 Big 8% Dividend Stocks to Buy (And 1 to Sell)
    Business
    TipRanks

    Analysts: 2 Big 8% Dividend Stocks to Buy (And 1 to Sell)

    Dividends provide a steady income stream, whether markets go up or down. With that in mind, we delved into the market data from TipRanks.com to get the lowdown on 3 high-yield dividend stocks, two of which analysts think are set to shine in 2020, and one whose prospects aren't quite as bright. Viper has exploration rights in more than 14,000 acres in the Midland, which are exploited by third parties and subsidiaries who then pay the royalties that make up Viper's income.

  • The stock market’s biggest problem this week isn’t the coronavirus or Mideast tensions, strategist warns
    Business
    MarketWatch

    The stock market’s biggest problem this week isn’t the coronavirus or Mideast tensions, strategist warns

    Hogan said the S&P 500 could see a pullback of as much as 5% — and it won't be because of the coronavirus or rising tensions with Iran. With a crowded slate of earnings on tap, Hogan warned that it will probably be the biggest winners getting the biggest haircuts. “There are five technology names that are driving a good chunk of the movement in the S&P. On the other side, you see the utilities index,” he explained.

  • Liz Weston: Retirees' top money regrets
    Business
    Associated Press

    Liz Weston: Retirees' top money regrets

    In a previous column, I detailed retirees' biggest lifestyle regrets, such as not traveling more before their health gave out and not communicating clearly with a partner about what they hoped retirement would be like. The big ones, of course, are starting to save too late and not saving enough, but there are other common regrets, according to certified financial planners from the Financial Planning Association and the Alliance of Comprehensive Planners. About 1 out of 3 Social Security recipients apply for benefits at the earliest age, which is 62.

  • World
    TheStreet.com

    Afghanistan Plane Crash Unlikely Linked to Boeing; US Military Investigating

    Boeing Co. shares extended declines Monday after reports that one of its planes was involved in a crash in the Taliban-controlled Afghan province of Ghazni. Later reports, however, indicated that the aircraft involved in the crash could belong to the U.S. Military, and the acting CEO of Ariana Afghan has said none of his company's fleet have been reported missing. A Taliban spokesperson later claimed responsibility for the crash, while a U.S. Military spokesperson told the Associated Press that the Army was investigating the claims.

  • Business
    Barrons.com

    Apple’s Earnings Could Cause Its Stock to Fall. How to Protect Its Gains With Options.

    J.P. Morgan has told its clients to do something that is both unusual and rare: Hedge (AAPL) stock ahead of its Tuesday earnings report. The bank has advised clients that investor expectations are incredibly high—perhaps too high—ahead of Apple's (ticker: AAPL) fiscal first-quarter earnings report that will be released after Tuesday's market close. Apple's stock is trading around 24 times J.P. Morgan's earnings estimates.

  • One of the most successful stock-market investors says these 3 events ‘would definitely trigger a bear market’
    Business
    MarketWatch

    One of the most successful stock-market investors says these 3 events ‘would definitely trigger a bear market’

    Stanley Druckenmiller, one of Wall Street's most successful investors, acknowledges that the markets are riding high and that investors may be able to finally breathe freely in the short term after a number of shocks, but says investors should be wary of three events that could knock assets into a bear market. One of the reasons I'm pretty sanguine right now is I think we're close enough to the election, at least we can breathe for a few months,” he told Bloomberg Television during a recent interview. But there are a trio of situations that could upend that optimism — and perhaps permanently.

  • Chipotle, Google, Tesla, Amazon, Berkshire Hathaway: Companies to Watch
    Business
    Yahoo Finance

    Chipotle, Google, Tesla, Amazon, Berkshire Hathaway: Companies to Watch

    UBS has boosted the stock to neutral and raised its price target to $900 a share. U.S. State Attorneys General will meet Justice Department attorneys this week to share information on their investigations into Google (GOOGL), according to multiple news reports. Elon Musk is making a few environmental promises.

  • Adam Schiff's Closing Remarks at Impeachment Trial Disturbs Some GOP Senators
    Politics
    Meredith Videos

    Adam Schiff's Closing Remarks at Impeachment Trial Disturbs Some GOP Senators

    Senate Republicans said lead impeachment prosecutor Adam Schiff insulted them during the trial by repeating an anonymously sourced report that the White House had threatened to punish Republicans who voted against President Donald Trump.

  • Stock market news live: Stocks slump as coronavirus death toll rises
    Business
    Yahoo Finance

    Stock market news live: Stocks slump as coronavirus death toll rises

    Global equity markets slumped Monday as fears over the deadly coronavirus flared further. The sell-off kicked off a busy week for potentially market-moving earnings and economic data releases – including U.S. fourth-quarter GDP and a Federal Reserve rate decision – on a volatile note. a.m.

  • How the stock market has performed during past viral outbreaks, as coronavirus infects thousands
    World
    MarketWatch

    How the stock market has performed during past viral outbreaks, as coronavirus infects thousands

    U.S. equity markets have experienced downbeat trade recently as investors keep one eye trained on a deadly flu outbreak in China. “Risk velocity – the pace at which major risks and 'black swan' events can affect asset prices – is elevated in today's markets compared to 10 years ago for three key reasons,” said Seema Shah, chief strategist at Principal Global Investors, in a research note, referring to the theory for the impact of unexpected events on markets and economies, popularized by Nassim Nicholas Taleb in his book The Black Swan: The Impact of the Highly Improbable.

  • The Key Move AbbVie Just Made To Help It Clinch A $63 Billion Deal
    Business
    Investor's Business Daily

    The Key Move AbbVie Just Made To Help It Clinch A $63 Billion Deal

    AbbVie stock popped Monday after the pharmaceutical company announced several divestments designed to help it secure the $63 billion takeover of Allergan. The pharmaceutical company plans to sell brazikumab to AstraZeneca. Nestle will buy AbbVie's Zenpep and Viokace.

  • Business
    Investopedia

    Apple Stock Could Enter Multi-Month Correction

    Relative strength indicators have lifted to extremely overbought weekly and monthly technical readings that have triggered past corrections, and it's unlikely to be different this time around. The stock has attracted an enormous supply of complacent shareholders since the summer of 2019, blinded to the reality that markets move in both directions. This amnesia could end with a shock event, like the current coronavirus outbreak, or more slowly through a pullback that gathers momentum over a few weeks.

  • Dow Jones Futures Plunge As Coronavirus Spreads Rapidly; Apple, Tesla Lead Huge Earnings Week
    Business
    Investor's Business Daily

    Dow Jones Futures Plunge As Coronavirus Spreads Rapidly; Apple, Tesla Lead Huge Earnings Week

    Dow Jones futures tumbled Monday morning, along with S&P 500 futures and Nasdaq futures. The stock market rally retreated last week on China's coronavirus, which has continued to spread rapidly. Meanwhile, Apple, Advanced Micro Devices, Tesla, Microsoft and Facebook headline a huge week for earnings.

  • Millennials Score Big On 3 Stocks (You May Not Own Yet)
    Business
    Investor's Business Daily

    Millennials Score Big On 3 Stocks (You May Not Own Yet)

    If you only own the S&P 500, you're missing out on three of millennials' biggest winning bets. Consumer discretionary Tesla and industrial sector member Uber are the two most valuable U.S. companies not yet in the S&P 500, says Howard Silverblatt, index strategist at S&P Dow Jones Indices. And then there's consumer discretionary Alibaba, which is based in China.

  • Want to solve the retirement crisis? Invest $7,500 for every baby born in America
    Business
    MarketWatch

    Want to solve the retirement crisis? Invest $7,500 for every baby born in America

    This federal program, which doles out an average monthly benefit of about $1,500, was never meant to be the sole source of retirement income for older Americans. One recent proposal aims to change that. As part of his work with the Stanford Center on Longevity, Ric Edelman, chairman and co-founder of Edelman Financial Engines, proposed a new vehicle to generate an additional source of retirement income.

  • Fog grounded choppers at time of Bryant crash
    News
    Associated Press Videos

    Fog grounded choppers at time of Bryant crash

    The helicopter carrying Kobe Bryant and eight others that crashed into a hillside outside Los Angeles was flying in foggy conditions considered dangerous enough that local police agencies grounded their choppers. All nine people on board died. Jan.

  • Mortgage Rates Slide Again and Head Toward All-Time Lows
    Business
    MoneyWise

    Mortgage Rates Slide Again and Head Toward All-Time Lows

    Mortgage rates that had been sitting on the slopes have gone back on their downhill course this week — possibly on their way to record territory. “Rates fell to the lowest level in three months and are about a quarter point above all-time lows,” said Sam Khater, chief economist with Freddie Mac, in a statement on the mortgage giant's latest weekly survey. If you're shopping for a home or are thinking about a refinance, you might compare mortgage rates and find you have the perfect opportunity to save serious money on interest.

  • Business
    Barrons.com

    AT&T Reports Earnings Wednesday. Here’s What To Expect.

    On the other, changing technologies and consumer preferences keep the pressure high on its DirecTV satellite TV and WarnerMedia entertainment units. AT&T (ticker: T) is scheduled to report its fourth-quarter earnings on Wednesday before the market opens. Any new details about AT&T's capital allocation priorities—the balance between dividend payments, share buybacks, investments, and debt reduction—will also be a focus.

  • Earnings Beat: Skyworks Solutions, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models
    Business
    Simply Wall St.

    Earnings Beat: Skyworks Solutions, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

    As you might know, Skyworks Solutions, Inc. (NASDAQ:SWKS) recently reported its quarterly numbers. The result was positive overall - although revenues of US$896m were in line with what analysts predicted, Skyworks Solutions surprised by delivering a statutory profit of US$1.50 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business.

  • Business
    MarketWatch

    Chesapeake Energy's stock falls toward 26-year low as coronavirus fears spark crude oil selloff

    Shares of Chesapeake Energy Corp. chk) fell 1.7% toward a 26-year low in active morning trading Monday, amid worries that the rapidly spreading deadly coronavirus would weaken demand for crude oil. The oil and gas company's stock was on track for the lowest close since April 1994, as continuous crude oil futures (cl00) dropped 1.8% toward a 3 1/2-month low.

  • Why You Should Like Enphase Energy, Inc.’s (NASDAQ:ENPH) ROCE
    Business
    Simply Wall St.

    Why You Should Like Enphase Energy, Inc.’s (NASDAQ:ENPH) ROCE

    Today we'll look at Enphase Energy, Inc. (NASDAQ:ENPH) and reflect on its potential as an investment. To be precise, we'll consider its Return On Capital Employed (ROCE), as that will inform our view of the quality of the business. First, we'll go over how we calculate ROCE.

  • Roth IRA Contributions with No Job?
    Business
    Investopedia

    Roth IRA Contributions with No Job?

    The internal Revenue Service (IRS) gets a little grumpy if you contribute to a Roth individual retirement account (IRA) without what it calls earned income. You don't necessarily need a formal job to contribute to a Roth IRA. Although it's not true in all cases, if you're paying taxes on any type of income from working, there's a good chance that you can make Roth IRA contributions.

  • Jeff Bezos Friended the Wrong Foreign Leaders
    Business
    Bloomberg

    Jeff Bezos Friended the Wrong Foreign Leaders

    Then last week, Bezos's yearlong tangle with Saudi Arabia burst into the headlines, with cybersecurity investigators concluding with “medium to high confidence” that Bezos's iPhone was hacked via a WhatsApp message sent directly from Crown Prince Mohammed bin Salman's account. Those are two very different situations in two separate parts of the world. But they had something in common—an overly optimistic bet (that Amazon placed, along with its Big Tech brethren) on global leaders whose dispositions turned out to be less open and, to varying degrees, more autocratic than Silicon Valley originally thought.