Intrinsic value of Acadia Realty Trust - AKR

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$27.44

  Intrinsic Value

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  Value-price divergence*

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Our model is not good at valuating stocks of financial companies, such as AKR.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AKR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 2.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -4.52
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  190
  194
  198
  203
  209
  215
  222
  230
  238
  247
  256
  267
  277
  289
  301
  314
  328
  343
  358
  374
  391
  410
  429
  449
  470
  492
  516
  541
  567
  594
  623
Variable operating expenses, $m
 
  139
  142
  146
  150
  154
  159
  165
  171
  177
  184
  191
  199
  207
  216
  225
  235
  245
  256
  268
  280
  293
  307
  321
  337
  353
  369
  387
  406
  426
  446
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  168
  139
  142
  146
  150
  154
  159
  165
  171
  177
  184
  191
  199
  207
  216
  225
  235
  245
  256
  268
  280
  293
  307
  321
  337
  353
  369
  387
  406
  426
  446
Operating income, $m
  22
  55
  56
  58
  59
  61
  63
  65
  68
  70
  73
  76
  79
  82
  86
  89
  93
  97
  102
  106
  111
  116
  122
  127
  134
  140
  147
  154
  161
  169
  177
EBITDA, $m
  92
  130
  133
  137
  141
  145
  150
  155
  160
  166
  173
  179
  187
  194
  203
  211
  221
  230
  241
  252
  263
  276
  288
  302
  316
  331
  347
  364
  381
  400
  419
Interest expense (income), $m
  42
  55
  57
  59
  61
  64
  67
  70
  73
  77
  81
  85
  89
  94
  99
  105
  111
  117
  123
  130
  138
  145
  153
  162
  171
  180
  190
  201
  212
  224
  236
Earnings before tax, $m
  134
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -29
  -32
  -34
  -37
  -41
  -44
  -47
  -51
  -55
  -59
Tax expense, $m
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  73
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -29
  -32
  -34
  -37
  -41
  -44
  -47
  -51
  -55
  -59

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  72
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  3,996
  4,038
  4,130
  4,237
  4,356
  4,488
  4,633
  4,790
  4,961
  5,145
  5,343
  5,554
  5,779
  6,019
  6,274
  6,545
  6,832
  7,135
  7,457
  7,796
  8,154
  8,532
  8,930
  9,351
  9,793
  10,260
  10,750
  11,267
  11,811
  12,383
  12,984
Adjusted assets (=assets-cash), $m
  3,924
  4,038
  4,130
  4,237
  4,356
  4,488
  4,633
  4,790
  4,961
  5,145
  5,343
  5,554
  5,779
  6,019
  6,274
  6,545
  6,832
  7,135
  7,457
  7,796
  8,154
  8,532
  8,930
  9,351
  9,793
  10,260
  10,750
  11,267
  11,811
  12,383
  12,984
Revenue / Adjusted assets
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
  0.048
Average production assets, $m
  2,274
  2,261
  2,313
  2,372
  2,439
  2,513
  2,594
  2,682
  2,778
  2,881
  2,992
  3,110
  3,236
  3,371
  3,513
  3,665
  3,826
  3,996
  4,175
  4,365
  4,566
  4,778
  5,001
  5,236
  5,484
  5,745
  6,020
  6,309
  6,614
  6,934
  7,271
Working capital, $m
  0
  -73
  -75
  -77
  -79
  -82
  -84
  -87
  -90
  -94
  -97
  -101
  -105
  -110
  -114
  -119
  -124
  -130
  -136
  -142
  -148
  -155
  -162
  -170
  -178
  -187
  -196
  -205
  -215
  -225
  -236
Total debt, $m
  1,559
  1,627
  1,684
  1,749
  1,822
  1,903
  1,992
  2,089
  2,193
  2,306
  2,427
  2,557
  2,695
  2,842
  2,998
  3,164
  3,340
  3,526
  3,723
  3,931
  4,150
  4,382
  4,626
  4,884
  5,155
  5,441
  5,742
  6,059
  6,392
  6,743
  7,111
Total liabilities, $m
  2,407
  2,475
  2,532
  2,597
  2,670
  2,751
  2,840
  2,937
  3,041
  3,154
  3,275
  3,405
  3,543
  3,690
  3,846
  4,012
  4,188
  4,374
  4,571
  4,779
  4,998
  5,230
  5,474
  5,732
  6,003
  6,289
  6,590
  6,907
  7,240
  7,591
  7,959
Total equity, $m
  1,589
  1,563
  1,598
  1,640
  1,686
  1,737
  1,793
  1,854
  1,920
  1,991
  2,068
  2,149
  2,237
  2,329
  2,428
  2,533
  2,644
  2,761
  2,886
  3,017
  3,156
  3,302
  3,456
  3,619
  3,790
  3,970
  4,160
  4,360
  4,571
  4,792
  5,025
Total liabilities and equity, $m
  3,996
  4,038
  4,130
  4,237
  4,356
  4,488
  4,633
  4,791
  4,961
  5,145
  5,343
  5,554
  5,780
  6,019
  6,274
  6,545
  6,832
  7,135
  7,457
  7,796
  8,154
  8,532
  8,930
  9,351
  9,793
  10,259
  10,750
  11,267
  11,811
  12,383
  12,984
Debt-to-equity ratio
  0.981
  1.040
  1.050
  1.070
  1.080
  1.100
  1.110
  1.130
  1.140
  1.160
  1.170
  1.190
  1.200
  1.220
  1.230
  1.250
  1.260
  1.280
  1.290
  1.300
  1.320
  1.330
  1.340
  1.350
  1.360
  1.370
  1.380
  1.390
  1.400
  1.410
  1.420
Adjusted equity ratio
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387
  0.387

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  73
  0
  -1
  -1
  -2
  -3
  -3
  -4
  -5
  -7
  -8
  -9
  -11
  -12
  -14
  -16
  -18
  -20
  -22
  -24
  -26
  -29
  -32
  -34
  -37
  -41
  -44
  -47
  -51
  -55
  -59
Depreciation, amort., depletion, $m
  70
  75
  77
  79
  81
  84
  86
  89
  93
  96
  100
  104
  108
  112
  117
  122
  128
  133
  139
  146
  152
  159
  167
  175
  183
  192
  201
  210
  220
  231
  242
Funds from operations, $m
  125
  76
  76
  78
  79
  81
  83
  85
  87
  89
  92
  94
  97
  100
  103
  106
  110
  114
  117
  121
  126
  130
  135
  140
  145
  151
  157
  163
  169
  176
  183
Change in working capital, $m
  13
  -1
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -11
Cash from operations, $m
  112
  413
  78
  80
  82
  84
  86
  88
  90
  93
  95
  98
  101
  104
  108
  111
  115
  119
  123
  128
  132
  137
  142
  148
  153
  159
  166
  172
  179
  187
  194
Maintenance CAPEX, $m
  0
  -74
  -75
  -77
  -79
  -81
  -84
  -86
  -89
  -93
  -96
  -100
  -104
  -108
  -112
  -117
  -122
  -128
  -133
  -139
  -146
  -152
  -159
  -167
  -175
  -183
  -192
  -201
  -210
  -220
  -231
New CAPEX, $m
  -645
  -44
  -52
  -59
  -67
  -74
  -81
  -88
  -96
  -103
  -111
  -118
  -126
  -134
  -143
  -152
  -161
  -170
  -180
  -190
  -201
  -212
  -223
  -235
  -248
  -261
  -275
  -289
  -304
  -320
  -337
Cash from investing activities, $m
  -611
  -118
  -127
  -136
  -146
  -155
  -165
  -174
  -185
  -196
  -207
  -218
  -230
  -242
  -255
  -269
  -283
  -298
  -313
  -329
  -347
  -364
  -382
  -402
  -423
  -444
  -467
  -490
  -514
  -540
  -568
Free cash flow, $m
  -499
  294
  -49
  -57
  -64
  -72
  -79
  -87
  -95
  -103
  -111
  -120
  -129
  -138
  -147
  -157
  -168
  -178
  -190
  -201
  -214
  -227
  -240
  -254
  -269
  -284
  -301
  -318
  -335
  -354
  -374
Issuance/(repayment) of debt, $m
  -48
  68
  57
  65
  73
  81
  89
  97
  105
  113
  121
  129
  138
  147
  156
  166
  176
  186
  197
  208
  220
  232
  244
  258
  271
  286
  301
  317
  333
  351
  369
Issuance/(repurchase) of shares, $m
  450
  0
  28
  33
  37
  42
  47
  51
  56
  61
  67
  72
  78
  84
  90
  96
  103
  110
  117
  125
  133
  141
  150
  159
  169
  179
  190
  201
  213
  225
  238
Cash from financing (excl. dividends), $m  
  589
  68
  85
  98
  110
  123
  136
  148
  161
  174
  188
  201
  216
  231
  246
  262
  279
  296
  314
  333
  353
  373
  394
  417
  440
  465
  491
  518
  546
  576
  607
Total cash flow (excl. dividends), $m
  90
  362
  8
  8
  9
  9
  10
  10
  10
  10
  10
  10
  10
  9
  9
  9
  8
  8
  7
  6
  6
  5
  4
  3
  2
  1
  0
  -1
  -2
  -4
  -5
Retained Cash Flow (-), $m
  -489
  -46
  -36
  -41
  -46
  -51
  -56
  -61
  -66
  -71
  -76
  -82
  -87
  -93
  -99
  -105
  -111
  -117
  -124
  -131
  -139
  -146
  -154
  -163
  -171
  -180
  -190
  -200
  -210
  -221
  -233
Prev. year cash balance distribution, $m
 
  72
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  389
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Discount rate, %
 
  8.90
  9.35
  9.81
  10.30
  10.82
  11.36
  11.93
  12.52
  13.15
  13.81
  14.50
  15.22
  15.98
  16.78
  17.62
  18.50
  19.43
  20.40
  21.42
  22.49
  23.61
  24.80
  26.03
  27.34
  28.70
  30.14
  31.65
  33.23
  34.89
  36.63
PV of cash for distribution, $m
 
  357
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  98.8
  97.4
  95.9
  94.2
  92.5
  90.7
  88.8
  86.9
  84.9
  82.9
  80.9
  78.8
  76.7
  74.7
  72.6
  70.6
  68.6
  66.6
  64.6
  62.6
  60.7
  58.8
  57.0
  55.1
  53.4
  51.6
  49.9
  48.3
  46.7

Acadia Realty Trust, a real estate investment trust (REIT), engages primarily in the ownership, acquisition, redevelopment, and management of retail properties in the United States. Its retail properties include neighborhood and community shopping centers, and mixed-use properties with retail components. As of December 31, 2008, it owned or had interests in, and operated 85 properties primarily in the northeast, mid-Atlantic, and Midwest regions of the United States. The company qualifies as a REIT for federal income tax purposes. As a REIT, it would not be subject to federal income tax to the extent that it distributes at least 90% of its taxable income to its shareholders. Acadia Realty Trust was founded in 1964 and is headquartered in White Plains, New York.

FINANCIAL RATIOS  of  Acadia Realty Trust (AKR)

Valuation Ratios
P/E Ratio 31.4
Price to Sales 12.1
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 20.5
Price to Free Cash Flow -4.3
Growth Rates
Sales Growth Rate -4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 26.7%
Cap. Spend. - 3 Yr. Gr. Rate 14.6%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 98.1%
Total Debt to Equity 98.1%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 2.6%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 5.4%
Return On Equity - 3 Yr. Avg. 6.5%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 73.7%
Gross Margin - 3 Yr. Avg. 73.3%
EBITDA Margin 129.5%
EBITDA Margin - 3 Yr. Avg. 133%
Operating Margin 11.6%
Oper. Margin - 3 Yr. Avg. 20.7%
Pre-Tax Margin 70.5%
Pre-Tax Margin - 3 Yr. Avg. 77.1%
Net Profit Margin 38.4%
Net Profit Margin - 3 Yr. Avg. 37%
Effective Tax Rate -0.7%
Eff/ Tax Rate - 3 Yr. Avg. 0.4%
Payout Ratio 124.7%

AKR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AKR stock intrinsic value calculation we used $190 million for the last fiscal year's total revenue generated by Acadia Realty Trust. The default revenue input number comes from 2016 income statement of Acadia Realty Trust. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AKR stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.9%, whose default value for AKR is calculated based on our internal credit rating of Acadia Realty Trust, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Acadia Realty Trust.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AKR stock the variable cost ratio is equal to 71.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AKR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Acadia Realty Trust.

Corporate tax rate of 27% is the nominal tax rate for Acadia Realty Trust. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AKR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AKR are equal to 1166.6%.

Life of production assets of 31.7 years is the average useful life of capital assets used in Acadia Realty Trust operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AKR is equal to -37.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1589 million for Acadia Realty Trust - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 83.123 million for Acadia Realty Trust is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Acadia Realty Trust at the current share price and the inputted number of shares is $2.3 billion.


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COMPANY NEWS

▶ Acadia Realty Trust reports 1Q results   [Apr-24-17 04:56PM  Associated Press]
▶ Acadia Realty Trust Announces 2017 Annual Meeting Date   [Mar-24-17 04:15PM  Business Wire]
▶ Is Acadia Realty Trust (AKR) A Good Stock To Buy?   [Dec-15-16 02:13AM  at Insider Monkey]
▶ Weingarten Realty sells Wake Forest retail center for $36.6M   [Oct-03-16 01:45PM  at bizjournals.com]
Stock chart of AKR Financial statements of AKR Annual reports of AKR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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