As of July 19, 2023, Boston Properties Inc (BXP, Financial) is trading at $64.42, marking a 3.6% change in the stock's price. With a market cap of $10.1 billion and sales of $3.2 billion, the company's financial metrics are noteworthy. The GF Value, a unique indicator provided by GuruFocus, estimates the company's intrinsic worth at $103.24, suggesting the stock might be undervalued. However, the valuation status warns of a possible value trap, urging investors to think twice before investing.
Boston Properties (BXP, Financial) is a real estate investment trust owning over 190 properties, equivalent to approximately 54 million rentable square feet of space. The company's portfolio, dominated by office buildings, is spread across major cities such as New York, Boston, San Francisco, Los Angeles, Seattle, and the Washington, D.C., region. It also owns limited retail, hotel, and residential properties.
GF Value of Boston Properties (BXP, Financial)
The GF Value of Boston Properties (BXP) is calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and 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 calculation, the stock may be undervalued and have higher future returns. At its current price of $64.42 per share, Boston Properties stock shows signs of being a possible value trap.
The GF Value Line suggests that Boston Properties might be a value trap due to its Altman Z-score of 0.75, which indicates distressed financial conditions and implies a higher risk of bankruptcy. A Z-score above 2.99 would indicate safer financial conditions. To learn more about how the Z-score measures financial risk, click here.
Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Therefore, investors must carefully review a company’s financial strength before deciding whether to buy shares. Boston Properties has a cash-to-debt ratio of 0.06, which ranks worse than 51.8% of companies in the REITs industry. Based on this, GuruFocus ranks Boston Properties’s financial strength as 3 out of 10, suggesting a weak balance sheet.
Profitability
Companies that have been consistently profitable over the long term offer less risk for investors. Boston Properties has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $3.2 billion and EPS of $4.99. Its operating margin is 33.02%, which ranks worse than 70.46% of companies in the REITs industry. Overall, the profitability of Boston Properties is ranked 8 out of 10, which indicates strong profitability.
Growth
One of the most important factors in the valuation of a company is growth. The average annual revenue growth of Boston Properties is 1.2%, which ranks better than 52.52% of companies in the REITs industry. The 3-year average EBITDA growth is 7.7%, which ranks better than 64% of companies in the REITs industry.
ROIC vs WACC
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted cost of capital. For the past 12 months, Boston Properties’s return on invested capital (ROIC) is 4.65, and its cost of capital is 6.19. Ideally, the ROIC should be higher than the WACC.
Conclusion
In conclusion, Boston Properties (BXP, Financial) shows signs of being a possible value trap. The company's financial condition is weak, but its profitability is strong. Its growth ranks better than 64% of companies in the REITs industry. To learn more about Boston Properties stock, you can check out its 30-Year Financials here.
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