With a daily loss of -0.54% and a 3-month decline of -8.45%, Invitation Homes Inc (INVH, Financial) and its Earnings Per Share (EPS) of $0.79 present an intriguing case for investors. The central question we aim to address is whether INVH stock is modestly undervalued. This article delves into a comprehensive valuation analysis to provide you with the insights needed to make an informed decision.
Company Introduction
Invitation Homes Inc (INVH, Financial) stands as a prominent entity in the housing market, boasting a portfolio of nearly 83,000 single-family rental homes. These properties, primarily situated in the Western U.S. and Florida, are strategically chosen within the starter and move-up market segments. With an average sale price of around $300,000 and sizes generally under 1,800 square feet, the company's homes offer a compelling alternative to traditional homeownership. The stock's current price of $31.51, when compared to the GF Value of $36.14, suggests that Invitation Homes may be trading at a discount, prompting a deeper investigation into its true value.
Summarize GF Value
The GF Value is an exclusive metric that encapsulates the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. When a stock trades significantly above this line, it may be overvalued, while a price well below it suggests potential undervaluation. Invitation Homes (INVH, Financial) currently exhibits signs of being modestly undervalued, with its stock price trailing behind the GF Value. This discrepancy indicates a possibility for higher future returns, given the company's valuation.
Because Invitation Homes is relatively undervalued, the long-term return of its stock is likely to surpass its business growth.
Link: These companies may deliver higher future returns at reduced risk.Financial Strength
Investing in companies with solid financial strength can mitigate the risk of capital loss. Key indicators such as the cash-to-debt ratio and interest coverage provide valuable insights into a company's financial resilience. Invitation Homes' cash-to-debt ratio of 0.09 is commendable within the REITs sector, yet its overall financial strength score of 4 out of 10 suggests there is room for improvement.
Profitability and Growth
Profitable companies, especially those with consistent performance, are typically less risky investments. Invitation Homes has a track record of profitability, with an operating margin of 28.97%, though it ranks lower than many peers in the REITs sector. The company's profitability rank of 6 out of 10 reflects its fair performance in this area. Growth is also a critical valuation component, and Invitation Homes' average annual revenue growth of 3.4% positions it favorably within the industry.
ROIC vs WACC
The comparison between Return on Invested Capital (ROIC) and Weighted Average Cost of Capital (WACC) is crucial in assessing profitability. A higher ROIC relative to WACC indicates value creation. Invitation Homes' ROIC of 3.83 is below its WACC of 8.27, suggesting the company could be more efficient in generating returns on its investments.
Conclusion
In summary, Invitation Homes (INVH, Financial) appears modestly undervalued, offering potential for higher returns. Despite its fair profitability and solid growth, the company's financial condition could be stronger. For a detailed exploration of Invitation Homes' financials, investors can review 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.
