Prologis (PLD) Has Valuation in Line with Sector Averages

We've been asking ourselves recently if the market has placed a fair valuation on Prologis. 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.

Prologis's Valuation Is in Line With Its Sector Averages:

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 38.0 and a P/B ratio of 2.13.

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 -7.19. 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.

Exceptional Profitability Overshadowed by Excessive Leverage:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $3,331 $4,439 $4,759 $5,974
Operating Margins 29.8% 31.6% 34.0% 38.2%
Net Margins 47.23% 33.38% 61.77% 56.33%
Net Income (MM) $1,573 $1,482 $2,940 $3,365
Net Interest Expense (MM) -$216 -$313 -$265 -$309
Depreciation & Amort. (MM) -$1,140 -$1,562 -$1,578 -$1,813
Earnings Per Share $2.46 $2.01 $3.94 $3.21
EPS Growth n/a -18.29% 96.02% -18.53%
Diluted Shares (MM) 655 754 765 923
Free Cash Flow (MM) $2,264 $2,937 $2,996 $4,126
Net Current Assets (MM) -$11,799 -$17,553 -$18,771 -$29,225
Current Ratio 1.92 1.36 0.96 0.13
Long Term Debt (MM) $11,722 $16,677 $17,224 $23,876
Net Debt / EBITDA 3.6 4.66 3.46 4.7

Prologis has growing revenues and no capital expenditures and strong margins with a positive growth rate. Additionally, the company's financial statements display a pattern of improving cash flows and positive EPS growth. However, the firm has a highly leveraged balance sheet.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.