Invitation Homes Inc (INVH, Financial) experienced a daily gain of 0.78%, yet over the past three months, the stock has seen a slight decline of 1.5%. With an Earnings Per Share (EPS) of $0.79, investors are keen to determine if the current stock valuation is justified. The critical question at hand is whether Invitation Homes is fairly valued in the market. The following analysis aims to provide clarity on this matter, guiding investors through the intricate details of the company's valuation.
Company Introduction
Invitation Homes Inc (INVH, Financial) boasts a substantial portfolio of nearly 83,000 single-family rental homes, primarily situated in high-growth markets across the Western U.S. and Florida. With a focus on starter and move-up segments, the company's average property sale price hovers around $300,000 for homes typically under 1,800 square feet. Comparing the current stock price of $33.54 to the GF Value of $35.42, we embark on a detailed exploration to ascertain the intrinsic worth of Invitation Homes.
Summarize GF Value
The GF Value is a unique measure of a stock's intrinsic value, utilizing historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and anticipated future business performance. The GF Value Line indicates the fair trading value of the stock, serving as a benchmark for investors. Should the stock price substantially exceed the GF Value Line, it may be considered overvalued, potentially leading to lackluster future returns. Conversely, a price well below the GF Value Line could signal higher future returns.
At a price of $33.54 per share and a market cap of $20.50 billion, Invitation Homes is deemed to be fairly valued according to the GF Value calculation. This suggests that the long-term return of its stock could align closely with the company's growth rate.
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Financial Strength
Assessing a company's financial strength is crucial as it helps investors avoid potential capital loss. Invitation Homes' cash-to-debt ratio of 0.09 places it ahead of 55.8% of its peers in the REITs industry. Despite this, the company's financial strength is rated as a moderate 4 out of 10, indicating a need for caution when evaluating its balance sheet.
Profitability and Growth
Consistent profitability is a sign of a less risky investment. Invitation Homes has maintained profitability over the past decade, with a revenue of $2.40 billion and an Earnings Per Share (EPS) of $0.79 in the last year. However, its operating margin of 28.97% ranks below 74% of its industry counterparts. The company's profitability score stands at 6 out of 10, reflecting adequate performance.
Growth is a vital valuation metric, as it often correlates with long-term stock performance. Invitation Homes' average annual revenue growth of 3.4% surpasses 61.73% of the companies in the REITs sector. Moreover, its 3-year average EBITDA growth rate of 3.3% is higher than 55.47% of its industry peers, showcasing a solid growth trajectory.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to its capital costs. Invitation Homes' ROIC of 3.83 is below its WACC of 8.44, indicating that the company is not generating sufficient returns on its investments.
Conclusion
In conclusion, Invitation Homes (INVH, Financial) appears to be fairly valued in the market. While its financial condition raises some concerns, its profitability and growth prospects are relatively stable. Investors interested in a deeper understanding of Invitation Homes' financials can 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.
