Unveiling Federal Realty Investment Trust (FRT)'s Value: Is It Really Priced Right? A ...
With a daily gain of 1.64%, a 3-month loss of 7%, and Earnings Per Share (EPS) of 4.66, Federal Realty Investment Trust (NYSE:FRT) presents an interesting case for value investors. Is the stock really modestly undervalued? This comprehensive analysis aims to answer that question, delving into the company's financials, GF Value, and future prospects. Read on to discover the true value of Federal Realty Investment Trust.
Company Introduction
Federal Realty Investment Trust is a retail real estate investment trust that owns high-quality properties in eight of the largest metropolitan markets. Its portfolio includes interest in 102 properties, encompassing 25.8 million square feet of retail space and over 3,100 multifamily units. Federal Realty's retail portfolio includes grocery-anchored centers, superregional centers, power centers, and mixed-use urban centers. The company's focus on owning assets in highly desirable areas with significant growth has resulted in a higher average population density and average median household income for its portfolio than any other retail REIT.
As of October 11, 2023, the company's stock price stands at $90.67, while its GF Value, an estimation of fair value, is $103.44. This suggests that Federal Realty Investment Trust may be modestly undervalued.
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 represents the stock's ideal fair trading value.
According to GuruFocus' valuation method, Federal Realty Investment Trust appears to be modestly undervalued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. Conversely, if the share price is significantly below the GF Value Line, the stock may be undervalued and have higher future returns. At its current price of $90.67 per share, Federal Realty Investment Trust stock seems to be modestly undervalued.
Given this undervaluation, the long-term return of Federal Realty Investment Trust's stock is likely to be higher than its business growth.
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Assessing Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss to investors. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Federal Realty Investment Trust has a cash-to-debt ratio of 0.02, ranking worse than 77.03% of 727 companies in the REITs industry. The overall financial strength of Federal Realty Investment Trust is 3 out of 10, indicating that its financial strength is poor.
Profitability and Growth
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Federal Realty Investment Trust has been profitable for 10 years over the past 10 years. During the past 12 months, the company had revenues of $1.10 billion and Earnings Per Share (EPS) of $4.66. Its operating margin of 34.22% is worse than 69.48% of 688 companies in the REITs industry. Overall, GuruFocus ranks Federal Realty Investment Trust's profitability as fair.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Federal Realty Investment Trust is 2.2%, ranking better than 56.56% of 633 companies in the REITs industry. The 3-year average EBITDA growth rate is 3%, ranking better than 54.6% of 533 companies in the REITs industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. 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. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Federal Realty Investment Trust's ROIC was 4.89 while its WACC came in at 9.28.
Conclusion
Overall, Federal Realty Investment Trust (NYSE:FRT) stock appears to be modestly undervalued. The company's financial condition is poor, and its profitability is fair. However, its growth ranks better than 54.6% of 533 companies in the REITs industry. To learn more about Federal Realty Investment Trust stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
