The stock of Gaming and Leisure Properties (NAS:GLPI, 30-year Financials) gives every indication of being 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 $47.11 per share and the market cap of $11 billion, Gaming and Leisure Properties stock appears to be modestly overvalued. GF Value for Gaming and Leisure Properties is shown in the chart below.
Because Gaming and Leisure Properties is relatively overvalued, the long-term return of its stock is likely to be lower than its business growth, which averaged 4.8% over the past 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. Gaming and Leisure Properties has a cash-to-debt ratio of 0.09, which which ranks in the middle range of the companies in REITs industry. The overall financial strength of Gaming and Leisure Properties is 3 out of 10, which indicates that the financial strength of Gaming and Leisure Properties is poor. This is the debt and cash of Gaming and Leisure Properties over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Gaming and Leisure Properties has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $1.2 billion and earnings of $2.38 a share. Its operating margin is 66.74%, which ranks better than 79% of the companies in REITs industry. Overall, GuruFocus ranks the profitability of Gaming and Leisure Properties at 7 out of 10, which indicates fair profitability. This is the revenue and net income of Gaming and Leisure Properties over the past years:
Growth is probably the most important factor 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. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Gaming and Leisure Properties is 4.8%, which ranks better than 74% of the companies in REITs industry. The 3-year average EBITDA growth rate is 11.1%, which ranks better than 81% of the companies in REITs industry.
Another way to look at the profitability of a company is to compare its return on invested capital and the weighted 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. We want to have the return on invested capital higher than the weighted cost of capital. For the past 12 months, Gaming and Leisure Properties's return on invested capital is 8.61, and its cost of capital is 6.94. The historical ROIC vs WACC comparison of Gaming and Leisure Properties is shown below:
Overall, The stock of Gaming and Leisure Properties (NAS:GLPI, 30-year Financials) gives every indication of being modestly overvalued. The company's financial condition is poor and its profitability is fair. Its growth ranks better than 81% of the companies in REITs industry. To learn more about Gaming and Leisure Properties stock, you can check out its 30-year Financials here.
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