What Alexander's latest earnings mean for investors
Alexander's (ALX) stock was in focus after the REIT reported weaker first quarter results, with lower net income, softer earnings per share, and funds from operations that did not meet analyst expectations.
See our latest analysis for Alexander's.
Despite the weaker quarter, Alexander's share price has a year to date return of 11.4% and the 1 year total shareholder return of 24.16% suggests momentum has been building over a longer horizon.
If earnings pressure at a single REIT has you thinking about where else income and growth could come from, it may be worth scanning 17 top founder-led companies
With the stock up strongly over 1 and 3 years, yet trading below the analyst price target and an intrinsic value estimate, the key question now is whether recent weakness has created an opening or if the market already reflects any potential future growth.
Price-to-Earnings of 44.1x: Is it justified?
Alexander's last closed at $243.82 and is being assessed as expensive on earnings, with a P/E of 44.1x compared with several benchmarks and fair value estimates.
The P/E ratio compares the current share price with earnings per share, giving a quick sense of how much investors are paying for each dollar of profit. For a REIT like Alexander's, a higher P/E can imply expectations for resilient earnings, valuable assets or a premium attached to its specific portfolio in the New York City area.
In this case, Alexander's P/E of 44.1x is described as expensive versus the US Retail REITs peer average of 25.2x, which is a sizeable gap. It is also higher than an estimated fair P/E of 29.3x, a level the market could move toward if sentiment or expectations change. Together, these checks suggest investors are currently paying a premium multiple to access the REIT's earnings profile.
Explore the SWS fair ratio for Alexander's
Result: Price-to-Earnings of 44.1x (OVERVALUED)
However, there are also risks, including a 9.2% annual decline in net income and a 22.1% premium to the US$190 analyst price target.
Find out about the key risks to this Alexander's narrative.
Another view: what the DCF model says
Price based on earnings paints Alexander's as expensive, and the SWS DCF model points the same way. With the stock at $243.82 versus an estimated future cash flow value of $173, the model suggests the price is rich on cash flows too. This raises the question of where a margin of safety could come from next.
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Alexander's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 48 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
If this all sounds mixed, that is exactly why it helps to move quickly and test the numbers yourself. You can start with the 4 important warning signs.
Looking for more investment ideas?
If Alexander's has raised questions rather than answers, that is a signal to widen your search and compare it with other stocks that fit different goals.
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- Focus on financial strength and hunt for stocks in the solid balance sheet and fundamentals stocks screener (44 results) so you are not relying on hope alone.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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