We've been asking ourselves recently if the market has placed a fair valuation on Mid-America Apartment Communities. 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.
Mid-America Apartment Communities's Valuation Is in Line With Its Sector Averages:
MAA, an S&P 500 company, is a real estate investment trust (REIT) focused on delivering full-cycle and superior investment performance for shareholders through the ownership, management, acquisition, development and redevelopment of quality apartment communities primarily in the Southeast, Southwest and Mid-Atlantic regions of the United States. As of June 30, 2023, MAA had ownership interest in 101,986 apartment units, including communities currently in development, across 16 states and the District of Columbia. 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, Mid-America Apartment Communities has a trailing 12 month P/E ratio of 25.0 and a P/B ratio of 2.39.
When we divide Mid-America Apartment Communities's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -6.68. 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.
Strong Revenue Growth With Increasing Reinvestment in the Business:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $1,571 | $1,641 | $1,678 | $1,778 | $2,020 | $2,134 |
| Revenue Growth | n/a | 4.43% | 2.25% | 5.97% | 13.6% | 5.66% |
| Net Margins | 15% | 22% | 15% | 30% | 32% | 27% |
| Net Income (MM) | $231 | $354 | $255 | $534 | $637 | $586 |
| Net Interest Expense (MM) | -$174 | $180 | $168 | $157 | $155 | $149 |
| Depreciation & Amort. (MM) | $122 | $497 | $511 | $533 | $543 | $562 |
| Earnings Per Share | $2.03 | $3.07 | $2.19 | $4.61 | $5.48 | $5.0 |
| EPS Growth | n/a | 51.23% | -28.66% | 110.5% | 18.87% | -8.76% |
| Diluted Shares (MM) | 114 | 114 | 114 | 115 | 116 | 117 |
| Capital Expenditures (MM) | $62 | $190 | $226 | $280 | $296 | $338 |
Mid-America Apartment Communities has rapidly growing revenues and increasing reinvestment in the business and decent operating margins with a positive growth rate. Additionally, the company's financial statements display a strong EPS growth trend and positive cash flows.
