Stock Analysis
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Pulling back 4.6% this week, Kimco Realty's NYSE:KIM) three-year decline in earnings may be coming into investors focus
Kimco Realty Corporation (NYSE:KIM) shareholders might be concerned after seeing the share price drop 13% in the last month. But that doesn't change the fact that the returns over the last three years have been pleasing. In the last three years the share price is up, 82%: better than the market.
Although Kimco Realty has shed US$563m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for Kimco Realty
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years of share price growth, Kimco Realty actually saw its earnings per share (EPS) drop 42% per year.
Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The dividend is no better now than it was three years ago, so that is unlikely to have driven the share price higher. But it's far more plausible that the revenue growth of 18% per year is viewed as evidence that Kimco Realty is growing. In that case, the revenue growth might be more important to shareholders, for now, thus justifying a higer share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
This free interactive report on Kimco Realty's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Kimco Realty's TSR for the last 3 years was 107%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We regret to report that Kimco Realty shareholders are down 19% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 12%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 5 warning signs for Kimco Realty you should be aware of, and 1 of them is concerning.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
What are the risks and opportunities for Kimco Realty?
Kimco Realty Corp. (NYSE:KIM) is a real estate investment trust (REIT) headquartered in Jericho, N.Y.
Rewards
Trading at 40.5% below our estimate of its fair value
Earnings are forecast to grow 22.06% per year
Risks
Interest payments are not well covered by earnings
Significant insider selling over the past 3 months
Profit margins (5.7%) are lower than last year (59.8%)
Large one-off items impacting financial results
Further research on
Kimco Realty
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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.
About NYSE:KIM
Kimco Realty
Kimco Realty Corp. (NYSE:KIM) is a real estate investment trust (REIT) headquartered in Jericho, N.Y.
Average dividend payer and fair value.
