Today, Prologis Inc (PLD, Financial) experienced a daily gain of 2.95%, despite a three-month loss of 15.84%. With an Earnings Per Share (EPS) of 3.42, an intriguing question arises: is Prologis modestly undervalued? This article delves into Prologis's valuation, providing a detailed analysis to help investors make informed decisions.
Company Overview
Prologis was established from the merger of AMB Property and Prologis Trust in June 2011. The company specializes in developing, acquiring, and operating high-quality industrial and logistics facilities worldwide, boasting about 1.2 billion square feet of space. It also manages approximately $60 billion of third-party AUM through its strategic capital business segment. Operating as a real estate investment trust, Prologis is divided into four global divisions: Americas, Europe, Asia, and other Americas. With a current stock price of $107.76 and a market cap of $99.80 billion, the GF Value estimates its fair value at $146.64, suggesting that the stock might be modestly undervalued.
Understanding GF Value
The GF Value is a proprietary measure calculated to represent the intrinsic value of a stock. It is derived from historical trading multiples such as PE Ratio, PS Ratio, PB Ratio, and Price-to-Free-Cash-Flow, adjusted by GuruFocus based on the company's past returns and growth, and incorporates estimates of future business performance. This valuation suggests that Prologis's stock price should ideally hover around this GF Value line. Currently, the stock's trading price is below this line, indicating that it is modestly undervalued and potentially poised for higher future returns.
Financial Strength and Risks
Assessing the financial strength of a company is crucial to avoid the risk of permanent capital loss. Prologis has a cash-to-debt ratio of 0.02, which is lower than 78.5% of companies in the REITs industry, indicating a potential risk in its financial structure. This financial positioning is reflected in its financial strength rating of 4 out of 10.
Profitability and Growth Prospects
Prologis has demonstrated strong profitability, with a 10-year track record of profits and a robust operating margin of 38.63%. Its average annual revenue growth rate of 12.7% ranks better than 79.44% of its industry peers. Additionally, the company's 3-year average EBITDA growth rate of 13% indicates healthy growth prospects, aligning with its strong market position and operational efficiency.
Evaluating ROIC and WACC
An essential aspect of assessing a company's profitability is comparing its Return on Invested Capital (ROIC) against its Weighted Average Cost of Capital (WACC). Prologis's ROIC over the past year stands at 3.27, which is lower than its WACC of 10.54, suggesting that the company is not generating sufficient returns on its capital investments relative to its costs.
Conclusion
In conclusion, Prologis (PLD, Financial) appears to be modestly undervalued based on its GF Value. While the company shows strong profitability and growth potential, its financial strength poses some risks that investors should consider. For those interested in a deeper exploration of Prologis's financials, detailed information can be found in its 30-Year Financials.
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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.
