Riocan Real Estate Investment Trust shares give all indications of fair value
– By GF value
The action of Riocan Real Estate Investment Trust (OTCPK: RIOCF, 30-year financial data) shows all signs of fair value, as calculated by GuruFocus Value. GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock should trade. It is calculated based on the historical multiples at which the stock has traded, past growth in business and analysts’ estimates of the company’s future performance. If a stock’s price is significantly above the GF value line, it is overvalued and its future performance is likely to be poor. On the other hand, if it is significantly lower than the GF value line, its future return will probably be higher. At its current price of $ 17.21 per share and market cap of $ 5.5 billion, Riocan Real Estate Investment Trust’s stock is showing all signs of fair value. Riocan Real Estate Investment Trust’s GF value is shown in the chart below.
Since the Riocan Real Estate Investment Trust is fairly valued, the long-term return on its shares is likely to be close to the growth rate of its business, which has averaged 0.6% over the years. last five years.
Since investing in companies with low financial strength can result in a permanent loss of capital, investors should carefully consider a company’s financial strength before deciding to buy stocks. Examining the cash-to-debt ratio and interest coverage can give a good initial idea of ââthe financial strength of the business. Riocan Real Estate Investment Trust has a cash-to-debt ratio of 0.03, which is worse than 72% of companies in the REIT industry. Based on this, GuruFocus ranks Riocan Real Estate Investment Trust’s financial strength as 4 out of 10, suggesting a poor track record. Here is Riocan Real Estate Investment Trust’s debt and cash flow over the past few years:
It is less risky to invest in profitable companies, especially those whose profitability is constant over the long term. A business with high profit margins is generally a safer investment than one with low profit margins. The Riocan Real Estate Investment Trust has been profitable 9 in the past 10 years. In the past twelve months, the company achieved sales of $ 855.4 million and a loss of $ 0.139 per share. Its operating margin is 55.05%, which ranks in the mid-range of companies in the REIT sector. Overall, Riocan Real Estate Investment Trust’s profitability is ranked 6th out of 10, indicating fair profitability. Here is the income and net profit of Riocan Real Estate Investment Trust for the past few years:
Growth is probably the most important factor in the valuation of a business. GuruFocus research has shown that growth is strongly correlated with a company’s long-term market performance. A faster growing business creates more shareholder value, especially if the growth is profitable. Average annual revenue growth over 3 years of Riocan Real Estate Investment Trust is 0.6%, which ranks in the mid-range of companies in the REIT sector. The 3-year average EBITDA growth rate is -46.7%, which ranks among the bottom 10% of companies in the REIT industry.
Another way to determine a company’s profitability is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures the extent to which a business generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all of its security holders to fund its assets. When the ROIC is higher than the WACC, it means that the company is creating value for its shareholders. In the past 12 months, Riocan Real Estate Investment Trust’s return on invested capital is 4.70 and its cost of capital is 5.88. The historical comparison of ROIC and WACC of Riocan Real Estate Investment Trust is shown below:
In summary, the action of Riocan Real Estate Investment Trust (OTCPK: RIOCF, Financials over 30 years) gives all indices of a fair value. The company’s financial situation is bad and its profitability is fair. Its growth ranks among the bottom 10% of companies in the REIT industry. To learn more about Riocan Real Estate Investment Trust’s stock, you can view its 30-year financial statements here.
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This article first appeared on GuruFocus.