Unveiling Empire State Realty OP LP (ESBA)'s Value: Is It Really Priced Right? A Comprehensive Guide
Empire State Realty OP LP (ESBA) has recently seen a daily gain of 4.97% and a three-month gain of 3.93%. With an Earnings Per Share (EPS) of $0.29, the stock appears to be modestly undervalued. This article provides a comprehensive valuation analysis of Empire State Realty OP LP, aiming to answer the question: Is the stock really undervalued?
Company Introduction
Empire State Realty OP LP is the operating partner of Empire State Realty Inc. The company, along with its partner, manages, operates, acquires, and repositions properties in Manhattan and the greater New York metropolitan area. The firm operates in two segments, Real Estate and Observatory. The Real Estate segment offers services related to the ownership, management, operation, acquisition, repositioning, and disposition of its real estate assets. The Observatory segment operates the two observatories of the Empire State Building. The company generates maximum revenue from the Real Estate segment.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value.
According to GuruFocus Value calculation, the stock of Empire State Realty OP LP (ESBA) appears to be modestly undervalued. At its current price of $7.88 per share and the market cap of $2.10 billion, Empire State Realty OP LP stock appears to be modestly undervalued. Given this, the long-term return of its stock is likely to be higher than its business growth.
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Assessing Financial Strength
Investing in companies with poor financial strength carries a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Empire State Realty OP LP has a cash-to-debt ratio of 0.14, which is better than 70.68% of 723 companies in the REITs industry. The overall financial strength of Empire State Realty OP LP is 4 out of 10, which indicates that the financial strength of Empire State Realty OP LP is poor.
Profitability and Growth
Companies with consistent profitability over the long term offer less risk for investors. Empire State Realty OP LP has been profitable 8 over the past 10 years. Its operating margin is 19.18%, which ranks worse than 81.99% of 683 companies in the REITs industry. Overall, the profitability of Empire State Realty OP LP is ranked 7 out of 10, which indicates fair profitability.
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Empire State Realty OP LP is 3.1%, which ranks better than 60.22% of 631 companies in the REITs industry. The 3-year average EBITDA growth is 6.9%, which ranks better than 64.22% of 531 companies in the REITs industry.
ROIC vs WACC
Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. For the past 12 months, Empire State Realty OP LP's return on invested capital is 3.54, and its cost of capital is 10.39.
Conclusion
In short, the stock of Empire State Realty OP LP (ESBA) appears to be modestly undervalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks better than 64.22% of 531 companies in the REITs industry. To learn more about Empire State Realty OP LP stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
