Selectirente is a €107.39m small-cap, real estate investment trust (REIT) based in Evry, France. REIT shares give you ownership of the company than owns and manages various income-producing property, whether it be commercial, industrial or residential. The structure of SELER is unique and it has to adhere to different requirements compared to other non-REIT stocks. Below, I’ll look at a few important metrics to keep in mind as part of your research on SELER.
Check out our latest analysis for SelectirenteFunds from Operations (FFO) is a higher quality measure of SELER’s earnings compared to net income. This term is very common in the REIT investing world as it provides a cleaner look at its cash flow from daily operations by excluding impact of one-off activities or non-cash items such as depreciation. For SELER, its FFO of €8.89m makes up 63.71% of its gross profit, which means the majority of its earnings are high-quality and recurring.
SELER’s financial stability can be gauged by seeing how much its FFO generated each year can cover its total amount of debt. The higher the coverage, the less risky SELER is, broadly speaking, to have debt on its books. The metric I’ll be using, FFO-to-debt, also estimates the time it will take for the company to repay its debt with its FFO. With a ratio of 8.63%, the credit rating agency Standard & Poor would consider this as aggressive risk. This would take SELER 11.59 years to pay off using just operating income, which is a long time, and risk increases with time. But realistically, companies have many levers to pull in order to pay back their debt, beyond operating income alone.
I also look at SELER’s interest coverage ratio, which demonstrates how many times its earnings can cover its yearly interest expense. This is similar to the concept above, but looks at the upcoming obligations. The ratio is typically calculated using EBIT, but for a REIT stock, it’s better to use FFO divided by net interest. With an interest coverage ratio of 3.31x, it’s safe to say SELER is generating an appropriate amount of cash from its borrowings.
I also use FFO to look at SELER’s valuation relative to other REITs in France by using the price-to-FFO metric. This is conceptually the same as the price-to-earnings (PE) ratio, but as previously mentioned, FFO is more suitable. SELER’s price-to-FFO is 12.08x, compared to the long-term industry average of 16.5x, meaning that it is undervalued.
Next Steps:
Selectirente can bring diversification into your portfolio due to its unique REIT characteristics. Before you make a decision on the stock today, keep in mind I’ve only covered one metric in this article, the FFO, which is by no means comprehensive. I’d strongly recommend continuing your research on the following areas I believe are key fundamentals for SELER:
- Future Outlook: What are well-informed industry analysts predicting for SELER’s future growth? Take a look at our free research report of analyst consensus for SELER’s outlook.
- Valuation: What is SELER worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SELER is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.