The stock of National Storage Affiliates Trust (NYSE:NSA, 30-year Financials) appears to be modestly overvalued, 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 $41.58 per share and the market cap of $3.1 billion, National Storage Affiliates Trust stock gives every indication of being modestly overvalued. GF Value for National Storage Affiliates Trust is shown in the chart below.
Because National Storage Affiliates Trust is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 2.4% over the past five years.
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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. National Storage Affiliates Trust has a cash-to-debt ratio of 0.01, which is worse than 88% of the companies in REITs industry. The overall financial strength of National Storage Affiliates Trust is 3 out of 10, which indicates that the financial strength of National Storage Affiliates Trust is poor. This is the debt and cash of National Storage Affiliates 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. National Storage Affiliates Trust has been profitable 6 years over the past 10 years. During the past 12 months, the company had revenues of $432.2 million and earnings of $0.49 a share. Its operating margin of 34.04% in the middle range of the companies in REITs industry. Overall, GuruFocus ranks National Storage Affiliates Trust's profitability as fair. This is the revenue and net income of National Storage Affiliates 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. National Storage Affiliates Trust's 3-year average revenue growth rate is in the middle range of the companies in REITs industry. National Storage Affiliates Trust's 3-year average EBITDA growth rate is 3.6%, which ranks better than 66% 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, National Storage Affiliates Trust's ROIC was 4.22, while its WACC came in at 3.42. The historical ROIC vs WACC comparison of National Storage Affiliates Trust is shown below:
Overall, the stock of National Storage Affiliates Trust (NYSE:NSA, 30-year Financials) appears to be modestly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks better than 66% of the companies in REITs industry. To learn more about National Storage Affiliates Trust stock, you can check out its 30-year Financials here.
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