Sun Belt Focus Will Drive Future Retail Expansion

Key Takeaways

• Focus on Sun Belt markets and strategic capital deployment in high-demand areas is set to drive occupancy and revenue growth.
  
• Strong financial flexibility and conservative balance sheet support accretive acquisitions and stable earnings amidst economic headwinds.
  
• InvenTrust faces risks from market conditions, regional reliance, competition, and consumer behavior, potentially affecting revenue diversification, margins, and financial performance.

Catalysts

InvenTrust Properties Corp. (the "Company," "IVT," or "InvenTrust") is a premier Sun Belt, multi-tenant essential retail REIT that owns, leases, redevelops, acquires and manages grocery-anchored neighborhood and community centers as well as high-quality power centers that often have a grocery component.

• InvenTrust has a strategy focused on the Sun Belt markets, where there is limited supply and increased demand for high-quality retail space. This is expected to drive higher occupancy rates and rental income, impacting revenue positively.
  
• The recent follow-on equity offering and increased unsecured credit facility provide InvenTrust with significant financial flexibility to pursue accretive acquisitions and redevelopment projects, expected to enhance earnings in the future.
  
• Leased occupancy is at an all-time high of 97%, with an additional pipeline that could provide $7.2 million of additional income, supporting stronger same-property NOI growth and overall revenue.
  
• InvenTrust's investment in high-demand markets like Phoenix and Richmond and its aim to reach 100% of ABR from Sun Belt assets are poised to drive further growth in revenue and NOI through strategic capital deployment.
  
• The conservative balance sheet, marked by a net leverage ratio of 20% and 100% fixed-rate debt, positions the company for stable earnings growth while managing risks from interest rate fluctuations.

InvenTrust Properties Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming InvenTrust Properties's revenue will grow by 3.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.3% today to 12.6% in 3 years time.
• Analysts expect earnings to reach $41.4 million (and earnings per share of $0.51) by about December 2027, up from $6.7 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 79.4x on those 2027 earnings, down from 352.6x today. This future PE is greater than the current PE for the US Retail REITs industry at 35.8x.
• Analysts expect the number of shares outstanding to grow by 1.53% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.31%, as per the Simply Wall St company report.

InvenTrust Properties Future Earnings Per Share Growth

Risks

• InvenTrust's move to expand its portfolio by acquiring properties may pose risks if the transaction market becomes less favorable, potentially impacting future revenues and capital efficiency.
  
• The increase in interest rates and market competition could affect the cost and viability of new external opportunities, impacting net margins due to higher acquisition costs.
  
• The company's reliance on the Sun Belt markets may expose them to regional economic downturns or over-concentration risks, affecting revenue diversification.
  
• Rising competition for high-quality retail space could drive up costs and diminish returns on investments, impacting future earnings and net margins.
  
• Any potential slowdown in retail demand or adverse changes in consumer behavior, particularly in discretionary spending, could negatively affect occupancy rates and rental income, impacting overall financial performance.

Valuation

• The analysts have a consensus price target of $33.25 for InvenTrust Properties based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $327.6 million, earnings will come to $41.4 million, and it would be trading on a PE ratio of 79.4x, assuming you use a discount rate of 7.3%.
• Given the current share price of $30.85, the analyst's price target of $33.25 is 7.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.