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AvalonBay Communities Inc (NYSE:AVB): What Does The Future Look Like?

Ashwin Virk

In December 2017, AvalonBay Communities Inc (NYSE:AVB) announced its most recent earnings update, which showed that the business experienced a major headwind with earnings deteriorating by -15.22%. Investors may find it useful to understand how market analysts view AvalonBay Communities’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in. See our latest analysis for AvalonBay Communities

Analysts’ outlook for the upcoming year seems pessimistic, with earnings declining by a double-digit -29.68%. In the next couple of years, earnings are predicted to continue to be below today’s level, with a decline of -26.19% in 2020, eventually reaching US$645.44M in 2021.

NYSE:AVB Future Profit Apr 12th 18

Even though it is useful to understand the growth year by year relative to today’s value, it may be more insightful to analyze the rate at which the earnings are moving every year, on average. The pro of this method is that we can get a bigger picture of the direction of AvalonBay Communities’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is -7.32%. This means, we can expect AvalonBay Communities will chip away at a rate of -7.32% every year for the next couple of years.

Next Steps:

For AvalonBay Communities, I’ve put together three important aspects you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is AVB 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 AVB is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AVB? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.