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Should Value Investors Pick Kimco Realty (KIM) Stock Now?

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  • KIM

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Kimco Realty Corporation KIM stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Kimco Realty has a trailing twelve months PE ratio of 17.7, as you can see in the chart below:

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 25.1. If we focus on the long-term PE trend, Kimco Realty’s current PE level puts it somewhat above its midpoint over the past five years.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 19.2. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

We should also point out that Kimco Realty has a forward PE ratio (price relative to this year’s earnings) of just 17, so it is fair to say that a slightly more value-oriented path may be ahead for Kimco Realty in the near term too.

P/CF Ratio

An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management, and (b) are less affected by variation in accounting policies between different companies.

The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.

In this case, Kimco Realty’s P/CF ratio of 14.9 is lower than its industry average of 18.4, which indicates that the stock is somewhat undervalued in this respect.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Broad Value Outlook

In aggregate, Kimco Realty currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Kimco Realty a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio (another great indicator of value) comes in at 2.6, which is somewhat better than the industry average of 3.3. Clearly, KIM is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Kimco Realty might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of B. This gives KIM a Zacks VGM score—or its overarching fundamental grade—of D. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been trending higher. The current quarter has seen three upward revisions in the past sixty days period, while the full year estimate has seen three upward and one downward revision in the same time period.

As a result, the consensus estimate for the current quarter and the full year has risen by 3.2% and 1.6%, respectively, in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Kimco Realty Corporation Price and Consensus

Kimco Realty Corporation Price and Consensus
Kimco Realty Corporation Price and Consensus

Kimco Realty Corporation price-consensus-chart | Kimco Realty Corporation Quote

The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Kimco Realty is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.

Bottom Line

Kimco Realty is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Its Zacks Rank also indicates growth potential in the near future. Also, the company’s prospects seem encouraging due to favorable broader factors, as it has a strong industry rank (top 36%). In fact, over the past year, the industry has clearly outperformed the broader market, as you can see below:

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.


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