Invitation Homes Inc (INVH, Financial) recently recorded a daily gain of 0.8%, yet it has experienced a loss of 9.16% over the past three months. With an Earnings Per Share (EPS) of $0.79, investors are contemplating whether the stock is modestly undervalued. This analysis aims to delve into the valuation of Invitation Homes, providing investors with a comprehensive understanding of its market position and potential for growth. Read on to uncover the intrinsic value of Invitation Homes and determine if now is an opportune time to invest.
Company Overview
Invitation Homes Inc (INVH, Financial) is a significant player in the real estate industry, owning a portfolio of nearly 83,000 single-family rental homes. The company's strategic focus lies in the starter and move-up segments of the housing market, with properties that are generally less than 1,800 square feet and have an average sale price around $300,000. Invitation Homes boasts a considerable presence in the Western U.S. and Florida, with over 70% of its portfolio situated in these regions, where rents are typically lower than homeownership costs. When compared to its current stock price of $31.49 and a GF Value of $36.33, the company appears to be modestly undervalued, suggesting a potential margin of safety for investors.
GF Value Explained
The GF Value is a proprietary valuation method that signifies the intrinsic worth of a stock. It is calculated by considering historical trading multiples, an adjustment factor based on the company's past performance and growth, and future business performance projections. Invitation Homes (INVH, Financial) currently trades below the GF Value Line, which indicates that the stock might be modestly undervalued. This could mean that the stock has a higher potential for future returns, assuming the company meets its growth expectations.
Because Invitation Homes is relatively undervalued, the long-term return of its stock is likely to outpace its business growth, presenting an attractive opportunity for value investors.
Financial Strength
Investing in companies with robust financial strength is crucial to mitigate the risk of capital loss. Invitation Homes has a cash-to-debt ratio of 0.09, which is better than 57.38% of its peers in the REITs industry. Despite this, the company's financial strength is ranked 4 out of 10 by GuruFocus, indicating a need for caution due to its poor balance sheet.
Profitability and Growth
Profitable companies, especially those with consistent performance, pose less risk for investors. Invitation Homes has maintained profitability over the past decade, with a revenue of $2.40 billion and an operating margin of 28.97%, which, however, ranks below many of its competitors in the REITs industry. The company's profitability score stands at 6 out of 10, reflecting a fair level of profitability.
Regarding growth, Invitation Homes' 3-year average revenue growth rate surpasses 61.93% of its industry counterparts. Its EBITDA growth rate for the same period is 3.3%, ranking above 55.89% of companies in the REITs industry, suggesting a stable growth trajectory.
ROIC vs. WACC
An effective measure of profitability is the comparison between a company's Return on Invested Capital (ROIC) and its Weighted Average Cost of Capital (WACC). Invitation Homes' ROIC over the past 12 months stands at 3.83, which is below its WACC of 8.22, indicating that the company may not be creating value for shareholders at the expected rate.
Conclusion
Overall, Invitation Homes (INVH, Financial) stock seems to be modestly undervalued. The company's financial condition is poor, and its profitability is fair, yet its growth prospects appear positive when compared to industry peers. For a more detailed financial overview of Invitation Homes, interested investors can review the company's 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.
