Discounted Cash Flow Calculation for DB:4IV using 2 Stage Free Cash Flow to Equity using Adjusted Funds From Operations Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
Invitation Homes is a Real Estate Investment Trust (REIT), we use funds from operations (FFO) or adjusted funds from operations (AFFO) instead of levered free cash flow for REITs. This excludes depreciation and borrowing. Ideally analysts estimates of AFFO are used, where these aren't available we use FFO.
DB:4IV DCF 1st Stage: Next 10 year cash flow forecast
Adjusted Funds From Operations (AFFO)
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Invitation Homes's share price is below the future cash flow value, but not at a moderate discount (< 20%).
Invitation Homes's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Invitation Homes's earnings available for a low price, and how does
this compare to other companies in the same industry?
Invitation Homes's earnings are expected to grow significantly at over 20% yearly.
Invitation Homes's revenue is expected to grow by 3.3% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Invitation Homes's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
0/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Invitation Homes's finances.
The net worth of a company is the difference between its assets and liabilities.
Invitation Homes is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Invitation Homes's long term commitments exceed its cash and other short term assets.
This treemap shows a more detailed breakdown of
Invitation Homes's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
High level of physical assets or inventory.
Debt is not covered by short term assets, assets are 0.1x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. Dallas B. Tanner has been President, Chief Executive Officer and Director of Invitation Homes Inc since January 16, 2019. He served as Interim President and Interim Chief Executive Officer of Invitation Homes Inc since August 27, 2018 until January 16, 2019. Mr. Tanner is the Co-Founder of Invitation Homes Inc. He served as the Chief Investment Officer of Invitation Homes Inc. since April 2012 until January 16, 2019 and was its Executive Vice President since April 2012 until August 27, 2018. Mr. Tanner has over 18 years of real estate experience through the establishment of numerous real estate platforms prior to Invitation Homes. In 2005, he founded Treehouse Group, for which he privately sourced funds for platform investments, including single-family homes, multifamily properties, manufactured housing, residential land, bridge financing and property management. In addition, Mr. Tanner was a Partner in a successful acquisition of First Scottsdale Bank of Arizona. He served as a Director of Invitation Homes Inc. since April 2012. He continues to serves on the board of Treehouse Group’s Pathfinder Ventures, a Southwest-focused commercial real estate fund established in 2011. Mr. Tanner served on the Maricopa County Flood Control board in Phoenix, Arizona and on the advisory board of First Scottsdale Bank. He is actively involved in American Indian Services and served as a missionary in the Netherlands and Belgium.
Dallas's compensation has increased whilst company is loss making.
Dallas's remuneration is higher than average for companies of similar size in Germany.
Management Team Tenure
Average tenure and age of the
management team in years:
The tenure for the Invitation Homes management team is about average.
Executive VP & CFO
Executive VP & COO
Senior VP & Chief Accounting Officer
Executive VP & CTO
Senior Director of Investor Relations
Senior Vice President of Communications
Senior VP & Chief HR Officer
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The average tenure for the Invitation Homes board of directors is less than 3 years, this suggests a new board.
Invitation Homes is a leading owner and operator of single-family rental homes, offering residents high-quality homes across America. With over 80,000 homes for lease in 17 markets across the country, Invitation Homes is meeting changing lifestyle demands by providing residents access to updated homes with features they value, such as close proximity to jobs and access to good schools. The Company's mission statement, "Together with you, we make a house a home," reflects its commitment to high-touch service that continuously enhances residents' living experiences and provides homes where individuals and families can thrive.
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