We've been asking ourselves recently if the market has placed a fair valuation on Digital Realty Trust. 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.
Digital Realty Trust's Valuation Is in Line With Its Sector Averages:
Digital Realty brings companies and data together by delivering the full spectrum of data center, colocation and interconnection solutions. PlatformDIGITAL, the company's global data center platform, provides customers with a secure data "meeting place" and a proven Pervasive Datacenter Architecture (PDx) solution methodology for powering innovation and efficiently managing Data Gravity challenges. 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, Digital Realty Trust has a trailing 12 month P/E ratio of 103.5 and a P/B ratio of 2.01.
Digital Realty Trust's PEG ratio is 10.5, 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.
The Company Has a Highly Leveraged Balance Sheet and a Declining EPS Growth Trend:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $3,209 | $3,904 | $4,428 | $4,692 |
| Operating Margins | 19.7% | 17.4% | 17.3% | 14.6% |
| Net Margins | 18.07% | 9.13% | 38.6% | 8.05% |
| Net Income (MM) | $580 | $356 | $1,709 | $378 |
| Net Interest Expense (MM) | -287 | -313 | -298 | -290 |
| Net Interest Expense (MM) | -$287 | -$313 | -$298 | -$290 |
| Depreciation & Amort. (MM) | -$1,164 | -$1,366 | -$1,487 | -$1,578 |
| Earnings Per Share | $2.35 | $1.0 | $5.94 | $1.1 |
| EPS Growth | n/a | -57.45% | 494.0% | -81.48% |
| Diluted Shares (MM) | 209 | 263 | 283 | 291 |
| Free Cash Flow (MM) | $1,514 | $1,707 | $1,702 | $1,659 |
| Net Current Assets (MM) | -$11,793 | -$16,876 | -$17,031 | -$20,752 |
| Current Ratio | 0.42 | 0.25 | 0.36 | 0.25 |
| Long Term Debt (MM) | $9,888 | $12,773 | $13,050 | $14,446 |
| Net Debt / EBITDA | 4.91 | 6.36 | 3.73 | 7.22 |
