We've been asking ourselves recently if the market has placed a fair valuation on Simon Property. 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.
Simon Property's Valuation Is in Line With Its Sector Averages:
Simon is a real estate investment trust engaged in the ownership of premier shopping, dining, entertainment and mixed-use destinations and an S&P 100 company (Simon Property Group, NYSE: SPG). Our properties across North America, Europe and Asia provide community gathering places for millions of people every day and generate billions in annual sales. The company belongs to the Real Estate sector, which has an average price to earnings (P/E) ratio of 25.55 and an average price to book (P/B) ratio of 2.1. In contrast, Simon Property has a trailing 12 month P/E ratio of 20.4 and a P/B ratio of 15.45.
Simon Property's PEG ratio is 2.54, 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 May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $5,645 | $5,755 | $4,608 | $5,117 | $5,291 | $5,531 |
| Revenue Growth | n/a | 1.95% | -19.94% | 11.05% | 3.41% | 4.53% |
| Operating Margins | 52% | 51% | 43% | 47% | 49% | 49% |
| Net Margins | 50% | 42% | 28% | 50% | 46% | 46% |
| Net Income (MM) | $2,822 | $2,423 | $1,277 | $2,569 | $2,452 | $2,530 |
| Net Interest Expense (MM) | $816 | $789 | $784 | $796 | $761 | $831 |
| Depreciation & Amort. (MM) | $1,282 | $1,341 | $1,318 | $1,263 | $1,227 | $1,259 |
| Earnings Per Share | $8.81 | $7.87 | $4.03 | $7.82 | $7.5 | $7.73 |
| EPS Growth | n/a | -10.67% | -48.79% | 94.04% | -4.09% | 3.07% |
| Diluted Shares (MM) | 320 | 308 | 317 | 329 | 327 | 327 |
| Free Cash Flow (MM) | $2,969 | $2,932 | $1,843 | $3,109 | $3,117 | $3,027 |
| Capital Expenditures (MM) | $782 | $876 | $484 | $528 | $650 | $800 |
| Total Debt (MM) | $23,306 | $24,163 | $26,723 | $25,321 | $24,960 | $24,917 |
| Net Debt / EBITDA | 5.42 | 5.52 | 7.82 | 6.74 | 6.39 | 6.1 |
