Extra Space Storage Inc (EXR, Financial) has recently shown a daily gain of 3.74% and a three-month gain of 3.08%. With an Earnings Per Share (EPS) of 4.49, the company presents an intriguing case for valuation analysis. Is Extra Space Storage modestly undervalued? This article delves into the financials and market position of EXR to determine its true market value.
Company Overview
Extra Space Storage is a fully integrated real estate investment trust that manages nearly 3,700 self-storage properties across 42 states. The company, with over 280 million net rentable square feet of storage space, operates a mix of owned, jointly owned, and third-party managed facilities. With a current stock price of $146.22 and a market cap of $31 billion, it stands as a substantial player in the REIT sector. But how does this compare to its intrinsic value?
Understanding GF Value
The GF Value is a proprietary measure used to estimate the fair value of a stock based on historical trading multiples, adjusted for past performance and expected future business performance. For Extra Space Storage, the GF Value is set at $182.53, suggesting that the stock is currently modestly undervalued. This valuation indicates potential for higher future returns relative to the company's growth trajectory.
Financial Strength and Risks
Investing in companies with robust financial health is crucial to avoid capital loss. Extra Space Storage's cash-to-debt ratio is currently at 0, ranking below the industry average. This places its financial strength at a lower rank, suggesting potential risks in its balance sheet.
Profitability and Growth Prospects
Extra Space Storage has consistently demonstrated profitability, with an impressive operating margin of 45.83%. The company has also maintained a strong growth rate, with an average annual revenue growth of 13.1%, outperforming many of its industry peers. This robust profitability and growth metric underscores its capability to generate value for shareholders.
Value Creation Analysis
Comparing the Return on Invested Capital (ROIC) against the Weighted Average Cost of Capital (WACC) provides insight into value creation. Extra Space Storage's ROIC of 6.05 is currently below its WACC of 10.44, indicating challenges in generating adequate returns on capital invested.
Conclusion
In conclusion, Extra Space Storage (EXR, Financial) appears modestly undervalued based on its GF Value, indicating a potential for higher future returns. However, investors should be cautious due to its financial strength concerns and the current gap between its ROIC and WACC. For a deeper dive into Extra Space Storage's financial health and stock performance, explore 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.
