The stock of SmartCentres Real Estate Investment Trust (OTCPK:CWYUF, 30-year Financials) shows every sign of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $21.45795 per share and the market cap of $3.7 billion, SmartCentres Real Estate Investment Trust stock appears to be fairly valued. GF Value for SmartCentres Real Estate Investment Trust is shown in the chart below.
Because SmartCentres Real Estate Investment Trust is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which is estimated to grow 0.05% annually over the next three to five years.
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Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. SmartCentres Real Estate Investment Trust has a cash-to-debt ratio of 0.15, which which ranks better than 71% of the companies in REITs industry. The overall financial strength of SmartCentres Real Estate Investment Trust is 4 out of 10, which indicates that the financial strength of SmartCentres Real Estate Investment Trust is poor. This is the debt and cash of SmartCentres Real Estate Investment Trust over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. SmartCentres Real Estate Investment Trust has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $583.8 million and earnings of $0.34 a share. Its operating margin of 55.30% in the middle range of the companies in REITs industry. Overall, GuruFocus ranks SmartCentres Real Estate Investment Trust's profitability as fair. This is the revenue and net income of SmartCentres Real Estate Investment Trust over the past years:
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. SmartCentres Real Estate Investment Trust's 3-year average revenue growth rate is in the middle range of the companies in REITs industry. SmartCentres Real Estate Investment Trust's 3-year average EBITDA growth rate is -22.9%, which ranks worse than 84% of the companies in REITs industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company 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 its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, SmartCentres Real Estate Investment Trust's return on invested capital is 4.15, and its cost of capital is 5.90. The historical ROIC vs WACC comparison of SmartCentres Real Estate Investment Trust is shown below:
To conclude, the stock of SmartCentres Real Estate Investment Trust (OTCPK:CWYUF, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks worse than 84% of the companies in REITs industry. To learn more about SmartCentres Real Estate Investment Trust stock, you can check out its 30-year Financials here.
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