The stock of Vornado Realty Trust (NYSE:VNO, 30-year Financials) is believed to be 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 $47.3 per share and the market cap of $9.1 billion, Vornado Realty Trust stock is estimated to be fairly valued. GF Value for Vornado Realty Trust is shown in the chart below.
Because Vornado Realty Trust is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.
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It is always important to check the financial strength of a company before buying its stock. Investing in companies with poor financial strength have a higher risk of permanent loss. Looking at the cash-to-debt ratio and interest coverage is a great way to understand the financial strength of a company. Vornado Realty Trust has a cash-to-debt ratio of 0.21, which is better than 79% of the companies in REITs industry. The overall financial strength of Vornado Realty Trust is 3 out of 10, which indicates that the financial strength of Vornado Realty Trust is poor. This is the debt and cash of Vornado Realty Trust over the past years:
Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Vornado Realty Trust has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $1.5 billion and loss of $1.81 a share. Its operating margin is 9.44%, which ranks worse than 86% of the companies in REITs industry. Overall, the profitability of Vornado Realty Trust is ranked 6 out of 10, which indicates fair profitability. This is the revenue and net income of Vornado Realty Trust over the past years:
One of the most important factors in the valuation of a company is growth. Long-term stock performance is closely correlated with growth according to GuruFocus research. Companies that grow faster create more value for shareholders, especially if that growth is profitable. The average annual revenue growth of Vornado Realty Trust is -9.8%, which ranks worse than 86% of the companies in REITs industry. The 3-year average EBITDA growth is -44%, which ranks in the bottom 10% of the companies in REITs industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). 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. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Vornado Realty Trust's ROIC was 1.01, while its WACC came in at 6.90. The historical ROIC vs WACC comparison of Vornado Realty Trust is shown below:
Overall, the stock of Vornado Realty Trust (NYSE:VNO, 30-year Financials) appears to be fairly valued. The company's financial condition is poor and its profitability is fair. Its growth ranks in the bottom 10% of the companies in REITs industry. To learn more about Vornado Realty Trust stock, you can check out its 30-year Financials here.
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