We've been asking ourselves recently if the market has placed a fair valuation on Extra Space Storage. Let's dive into some of the fundamental values of this large-cap Real Estate company to determine if there might be an opportunity here for value-minded investors.
Extra Space Storage's Valuation Is in Line With Its Sector Averages:
Extra Space Storage Inc., headquartered in Salt Lake City, Utah, is a self-administered and self-managed REIT and a member of the S&P 500. 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, Extra Space Storage has a trailing 12 month P/E ratio of 22.9 and a P/B ratio of 6.04.
Extra Space Storage's PEG ratio is 4.05, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Exceptional Profitability Overshadowed by Excessive Leverage:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $1,308 | $1,356 | $1,577 | $1,924 |
| Operating Margins | 48.4% | 47.8% | 53.0% | 53.9% |
| Net Margins | 32.1% | 35.52% | 52.47% | 44.73% |
| Net Income (MM) | $420 | $482 | $828 | $861 |
| Net Interest Expense (MM) | -184 | -157 | -116 | -150 |
| Net Interest Expense (MM) | -$184 | -$157 | -$116 | -$150 |
| Depreciation & Amort. (MM) | -$220 | -$224 | -$242 | -$288 |
| Earnings Per Share | $3.24 | $3.71 | $6.19 | $6.34 |
| EPS Growth | n/a | 14.51% | 66.85% | 2.42% |
| Diluted Shares (MM) | 136 | 130 | 140 | 135 |
| Free Cash Flow (MM) | $700 | $764 | $949 | $1,215 |
| Capital Expenditures (MM) | -$8 | -$7 | -$4 | -$23 |
| Net Current Assets (MM) | -$5,540 | -$6,332 | -$6,612 | -$7,996 |
| Current Ratio | 0.22 | 0.11 | 0.1 | 0.08 |
| Long Term Debt (MM) | $4,888 | $4,797 | $5,423 | $6,386 |
| Net Debt / EBITDA | 5.97 | 6.43 | 4.88 | 5.49 |
Extra Space Storage has growing revenues and increasing reinvestment in the business and strong margins with a stable trend. Additionally, the company's financial statements display a pattern of improving cash flows and a strong EPS growth trend. However, the firm has a highly leveraged balance sheet.
