Is Kimco Realty Corp (KIM) Modestly Undervalued?
Kimco Realty Corp (NYSE:KIM) experienced a daily loss of 1.99%, though it has gained 9.16% over the past three months. With an Earnings Per Share (EPS) of 0.61, the question arises - is the stock modestly undervalued? This article aims to provide an in-depth valuation analysis of Kimco Realty Corp.
A Brief Introduction to Kimco Realty Corp
Kimco Realty Corp, one of the oldest real estate investment trusts in the United States, owns interests in 532 shopping centers throughout major U.S. markets, representing approximately 77 million square feet. Its current stock price stands at $19.42, with a market cap of $12 billion. The company's GF Value, an estimation of fair value, is $21.56, suggesting that the stock might be undervalued.
Understanding the GF Value of Kimco Realty Corp
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. It is calculated based on three factors: historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of business performance.
According to the GF Value calculation, Kimco Realty Corp appears to be modestly undervalued. With its current price of $19.42 per share and a market cap of $12 billion, the long-term return of its stock is likely to be higher than its business growth.
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Assessing the Financial Strength of Kimco Realty Corp
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Kimco Realty Corp has a cash-to-debt ratio of 0.12, ranking better than 66.3% of companies in the REITs industry. GuruFocus ranks Kimco Realty Corp's financial strength as 4 out of 10, suggesting a poor balance sheet.
Profitability and Growth of Kimco Realty Corp
Companies that have been consistently profitable over the long term offer less risk for investors. Kimco Realty Corp has been profitable 10 times over the past 10 years. Over the past twelve months, the company had a revenue of $1.80 billion and Earnings Per Share (EPS) of $0.61. Its operating margin is 32.82%, which ranks worse than 71.19% of companies in the REITs industry. Overall, the profitability of Kimco Realty Corp is ranked 7 out of 10, indicating fair profitability.
Growth is an important factor in the valuation of a company. The 3-year average annual revenue growth of Kimco Realty Corp is 0.6%, which ranks worse than 51.66% of companies in the REITs industry. The 3-year average EBITDA growth rate is -11.6%, which ranks worse than 76.8% of companies in the REITs industry.
ROIC vs WACC
Another method of determining the profitability of a company is to compare its return on invested capital (ROIC) to the weighted average cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Kimco Realty Corp's ROIC is 2.48, and its cost of capital is 8.48.
Conclusion
Overall, Kimco Realty Corp (NYSE:KIM) stock shows every sign of being modestly undervalued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 76.8% of companies in the REITs industry. To learn more about Kimco Realty Corp stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
