Long-established in the REITs industry, Simon Property Group Inc (SPG, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.83%, juxtaposed with a three-month change of 5.7%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Simon Property Group Inc.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 4/10
- Profitability rank: 8/10
- Growth rank: 1/10
- GF Value rank: 3/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned Simon Property Group Inc the GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding Simon Property Group Inc Business
Simon Property Group Inc is the second-largest real estate investment trust in the United States, boasting a market cap of $56.97 billion. Its portfolio includes an interest in 231 properties: 136 traditional malls, 70 premium outlets, 14 Mills centers, 6 lifestyle centers, and 5 other retail properties. The company's portfolio averaged $743 in sales per square foot in 2023, compared with $693 in sales per square foot over the 12 months before the pandemic. Additionally, Simon Property Group Inc owns a 22% interest in Klépierre, a European retail company with investments in shopping centers in 14 countries, and joint-venture interests in 33 premium outlets across 11 countries.
Financial Strength Breakdown
Simon Property Group Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company has an interest coverage ratio of 3.38, which positions it better than 57.51% of 706 companies in the REITs industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 1.44, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.1 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 9.56, which is worse than 98.46% of 716 companies in the REITs industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations. Additionally, the company's debt-to-Ebitda ratio is 5.03, which is above Joel Tillinghast's warning level of 4 and is better than 71.08% of 567 companies in the REITs industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Growth Prospects
A lack of significant growth is another area where Simon Property Group Inc seems to falter, as evidenced by the company's low Growth rank. Lastly, Simon Property Group Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should carefully consider these factors when evaluating Simon Property Group Inc's future prospects. For those seeking companies with stronger GF Scores, GuruFocus Premium members can find more options using the following screener link: GF Score Screen.
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.
