Today we're going to take a closer look at large-cap Real Estate company Prologis, whose shares are currently trading at $103.48. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. The company belongs to the Real Estate sector, which has an average price to earnings (P/E) ratio of 24.81 and an average price to book (P/B) ratio of 2.24. In contrast, Prologis has a trailing 12 month P/E ratio of 33.0 and a P/B ratio of 1.78.
When we divide Prologis's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -5.68. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $2,804 | $3,331 | $4,439 | $4,759 | $5,974 | $7,722 |
| Operating Margins | 67.0% | 56.0% | 48.0% | 70.0% | 62.0% | 48.0% |
| Net Margins | 65.0% | 51.0% | 36.0% | 66.0% | 60.0% | 45.0% |
| Net Income (MM) | $1,823 | $1,702 | $1,617 | $3,149 | $3,555 | $3,467 |
| Net Interest Expense (MM) | $229 | $240 | $315 | $266 | $309 | $471 |
| Depreciation & Amort. (MM) | $947 | $1,140 | $1,562 | $1,578 | $1,813 | $2,218 |
| Earnings Per Share | $2.87 | $2.46 | $2.01 | $3.94 | $4.25 | $3.8 |
| Diluted Shares (MM) | 590 | 655 | 754 | 765 | 812 | 1,183 |
| Free Cash Flow (MM) | -$150 | $469 | $1,017 | $356 | $1,008 | $1,442 |
| Capital Expenditures (MM) | $1,953 | $1,795 | $1,920 | $2,640 | $3,118 | $3,368 |
| Net Current Assets (MM) | -$5,011 | -$12,176 | -$16,608 | -$17,098 | -$25,082 | -$29,424 |
| Long Term Debt (MM) | $11,090 | $11,906 | $16,849 | $17,715 | $23,876 | $28,129 |
| Net Debt / EBITDA | 3.79 | 3.62 | 4.41 | 3.5 | 4.29 | 4.65 |
Prologis has growing revenues and increasing reinvestment in the business and decent operating margins with a negative growth trend. Additionally, the company's financial statements display positive EPS growth and generally positive cash flows. However, the firm has a highly leveraged balance sheet.
