Essex Property Trust Inc (ESS, Financial) experienced a daily loss of -1.82%, and a 3-month loss of -0.73%. Its Earnings Per Share (EPS) stands at 8.22. Despite these figures, the stock appears to be modestly undervalued. This article presents an in-depth valuation analysis of Essex Property Trust (ESS), providing valuable insights for potential investors.
Company Introduction
Essex Property Trust owns a portfolio of 252 apartment communities with over 62,000 units. The company is also developing another property with 264 units. Its focus is on owning large, high-quality properties on the West Coast, specifically in the urban and suburban submarkets of Southern California, Northern California, and Seattle. With a current stock price of $227.03 per share, Essex Property Trust has a market cap of $14.60 billion, indicating that the stock might be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. This value is derived from historical multiples, a GuruFocus adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Essex Property Trust's stock seems to be modestly undervalued according to GuruFocus' valuation method. This suggests that the long-term return of its 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 avoid this, an investor must review a company's financial strength before purchasing shares. Essex Property Trust has a cash-to-debt ratio of 0.03, ranking worse than 68.43% of 719 companies in the REITs industry. Overall, the financial strength of Essex Property Trust is rated 4 out of 10, indicating that it is poor.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. Essex Property Trust has been profitable over the past 10 years. Over the past twelve months, the company had a revenue of $1.70 billion and Earnings Per Share (EPS) of $8.22. Its operating margin is 31.95%, ranking worse than 70.83% of 665 companies in the REITs industry. Overall, GuruFocus ranks the profitability of Essex Property Trust at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. The 3-year average annual revenue growth rate of Essex Property Trust is 3.7%, ranking better than 62.88% of 633 companies in the REITs industry. However, the 3-year average EBITDA growth rate is 1%, ranking worse than 51.87% of 536 companies in the REITs industry.
Comparing ROIC and WACC
Return on invested capital (ROIC) and the weighted average cost of capital (WACC) are crucial metrics for evaluating a company's profitability. Over the past 12 months, Essex Property Trust's ROIC was 4.34, while its WACC came in at 7.77. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders.
Conclusion
In summary, the stock of Essex Property Trust seems to be modestly undervalued. The company's financial condition is poor, but its profitability is strong. Its growth ranks worse than 51.87% of 536 companies in the REITs industry. To learn more about Essex Property Trust stock, you can check out its 30-Year Financials here.
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