Monmouth Real Estate Investmen – GuruFocus.com
The stock of Monmouth Real Estate Investment (NYSE: MNR, 30-year Financials) shows all signs of a slight overvaluation according to the GuruFocus Value calculation. GuruFocus Value is GuruFocus’ estimate of the fair value at which the stock should trade. It is calculated based on the historical multiples at which the stock was traded, past business growth and analyst estimates of future business development. If a stock is well above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is well below the GF Value Line, its future return will likely be higher. With a current price of US $ 19.16 per share and a market capitalization of US $ 1.9 billion, the stock of Monmouth Real Estate Investment is estimated to be slightly overvalued. The GF value for Monmouth Real Estate Investment is shown in the graph below.
With Monmouth Real Estate Investment being relatively overvalued, its long-term return on its stock is likely to be below business growth, which averaged 2% over the past five years.
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It is always important to check a company’s financial strength before buying its stock. Investing in companies with low financial strength carries a higher risk of permanent loss. Looking at the liquidity-to-debt ratio and interest coverage is a great way to understand a company’s financial strength. Monmouth Real Estate Investment has a cash-to-debt ratio of 0.16, which is better than 74% of companies in the REIT industry. The total financial strength of Monmouth Real Estate Investment is 4 out of 10, which suggests that Monmouth Real Estate Investment’s financial strength is low. These are Monmouth Real Estate Investment’s debts and cash over the past few years:
Investing in profitable companies carries less risk, especially in companies that have consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. Monmouth Real Estate Investment has been profitable for 9 years over the past 10 years. For the past 12 months, the company had sales of $ 174.7 million and earnings of $ 0.75 per share. Its operating margin of 49.20% is in the middle of the field for companies in the REITs industry. Overall, GuruFocus rates Monmouth Real Estate Investment’s profitability as fair. These are the revenues and net revenues of Monmouth Real Estate Investment over the past few years:
Growth is probably the most important factor in evaluating a company. GuruFocus research has shown that growth is closely related to the long-term performance of a company’s stock. The faster a company grows, the more likely it is to create value for shareholders, especially if the growth is profitable. Monmouth Real Estate Investment’s 3 year average annual revenue growth rate is 2%, which is in the middle of the range for companies in the REITs industry. The 3-year average EBITDA growth rate is -21.3%, which is worse than 79% of companies in the REITs industry.
Another way to determine a company’s profitability is to compare the return on invested capital to the weighted average cost of capital. The return on investment (ROIC) measures how well a company generates cash flow in relation to the capital invested in its business. The weighted average cost of capital (WACC) is the average rate a company must pay to all of its securityholders to fund its assets. When the ROIC is higher than the WACC, it means the company is creating value for shareholders. Over the past 12 months, the Monmouth Real Estate Investment return on investment is 4.64 and the cost of capital is 5.75. Monmouth Real Estate Investment’s historical ROIC vs. WACC comparison is shown below:
In conclusion, Monmouth Real Estate Investment (NYSE: MNR 30-Year Financials) stock is showing all signs of being slightly overvalued. The company’s financial condition is poor and profitability is fair. Its growth underperforms 79% of companies in the REITs industry. To find out more about Monmouth Real Estate Investment stock, check out 30 year financials here.
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