Intrinsic value of Preferred Apartment Communities - APTS

Previous Close

$18.30

  Intrinsic Value

$9.28

stock screener

  Rating & Target

sell

-49%

  Value-price divergence*

+68%

Previous close

$18.30

 
Intrinsic value

$9.28

 
Up/down potential

-49%

 
Rating

sell

 
Value-price divergence*

+68%

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

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

We calculate the intrinsic value of APTS 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 0.4

 

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, %
  83.49
  59.50
  54.05
  49.15
  44.73
  40.76
  37.18
  33.96
  31.07
  28.46
  26.11
  24.00
  22.10
  20.39
  18.85
  17.47
  16.22
  15.10
  14.09
  13.18
  12.36
  11.63
  10.96
  10.37
  9.83
  9.35
  8.91
  8.52
  8.17
  7.85
  7.57
Revenue, $m
  200
  319
  491
  733
  1,061
  1,493
  2,048
  2,744
  3,596
  4,620
  5,826
  7,225
  8,822
  10,621
  12,623
  14,828
  17,234
  19,836
  22,630
  25,613
  28,779
  32,125
  35,647
  39,343
  43,210
  47,249
  51,460
  55,845
  60,407
  65,151
  70,081
Variable operating expenses, $m
 
  263
  405
  605
  875
  1,232
  1,690
  2,264
  2,967
  3,811
  4,807
  5,961
  7,278
  8,762
  10,414
  12,233
  14,218
  16,364
  18,670
  21,131
  23,743
  26,503
  29,409
  32,458
  35,648
  38,981
  42,455
  46,072
  49,836
  53,749
  57,817
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
  170
  263
  405
  605
  875
  1,232
  1,690
  2,264
  2,967
  3,811
  4,807
  5,961
  7,278
  8,762
  10,414
  12,233
  14,218
  16,364
  18,670
  21,131
  23,743
  26,503
  29,409
  32,458
  35,648
  38,981
  42,455
  46,072
  49,836
  53,749
  57,817
Operating income, $m
  30
  56
  86
  128
  186
  261
  358
  480
  629
  808
  1,020
  1,264
  1,544
  1,859
  2,209
  2,595
  3,016
  3,471
  3,960
  4,482
  5,036
  5,622
  6,238
  6,885
  7,562
  8,269
  9,006
  9,773
  10,571
  11,401
  12,264
EBITDA, $m
  108
  180
  277
  413
  598
  842
  1,155
  1,548
  2,029
  2,606
  3,287
  4,075
  4,976
  5,991
  7,121
  8,364
  9,721
  11,189
  12,765
  14,448
  16,234
  18,121
  20,108
  22,192
  24,374
  26,652
  29,028
  31,501
  34,075
  36,750
  39,531
Interest expense (income), $m
  39
  51
  83
  129
  193
  281
  396
  544
  730
  957
  1,231
  1,553
  1,926
  2,352
  2,832
  3,367
  3,956
  4,598
  5,292
  6,038
  6,834
  7,679
  8,573
  9,513
  10,499
  11,531
  12,610
  13,734
  14,904
  16,122
  17,388
Earnings before tax, $m
  -10
  5
  3
  0
  -7
  -19
  -38
  -64
  -101
  -149
  -211
  -288
  -382
  -494
  -623
  -772
  -940
  -1,126
  -1,332
  -1,556
  -1,798
  -2,058
  -2,334
  -2,628
  -2,937
  -3,263
  -3,604
  -3,961
  -4,333
  -4,721
  -5,124
Tax expense, $m
  0
  1
  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
Net income, $m
  -10
  4
  2
  0
  -7
  -19
  -38
  -64
  -101
  -149
  -211
  -288
  -382
  -494
  -623
  -772
  -940
  -1,126
  -1,332
  -1,556
  -1,798
  -2,058
  -2,334
  -2,628
  -2,937
  -3,263
  -3,604
  -3,961
  -4,333
  -4,721
  -5,124

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  12
  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
  2,421
  3,843
  5,921
  8,830
  12,780
  17,989
  24,678
  33,060
  43,330
  55,662
  70,198
  87,048
  106,288
  127,962
  152,087
  178,654
  207,633
  238,983
  272,654
  308,590
  346,739
  387,050
  429,484
  474,008
  520,605
  569,267
  620,003
  672,836
  727,801
  784,949
  844,347
Adjusted assets (=assets-cash), $m
  2,409
  3,843
  5,921
  8,830
  12,780
  17,989
  24,678
  33,060
  43,330
  55,662
  70,198
  87,048
  106,288
  127,962
  152,087
  178,654
  207,633
  238,983
  272,654
  308,590
  346,739
  387,050
  429,484
  474,008
  520,605
  569,267
  620,003
  672,836
  727,801
  784,949
  844,347
Revenue / Adjusted assets
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
  0.083
Average production assets, $m
  1,440
  2,296
  3,537
  5,276
  7,635
  10,747
  14,743
  19,751
  25,887
  33,255
  41,939
  52,005
  63,500
  76,449
  90,862
  106,734
  124,047
  142,777
  162,893
  184,362
  207,153
  231,237
  256,588
  283,189
  311,027
  340,100
  370,411
  401,975
  434,813
  468,955
  504,441
Working capital, $m
  0
  160
  246
  366
  530
  747
  1,024
  1,372
  1,798
  2,310
  2,913
  3,612
  4,411
  5,310
  6,312
  7,414
  8,617
  9,918
  11,315
  12,806
  14,390
  16,063
  17,824
  19,671
  21,605
  23,625
  25,730
  27,923
  30,204
  32,575
  35,040
Total debt, $m
  1,465
  2,361
  3,676
  5,518
  8,018
  11,315
  15,549
  20,855
  27,356
  35,162
  44,363
  55,029
  67,208
  80,928
  96,199
  113,016
  131,360
  151,205
  172,518
  195,266
  219,414
  244,931
  271,791
  299,975
  329,471
  360,274
  392,390
  425,833
  460,626
  496,801
  534,399
Total liabilities, $m
  1,537
  2,433
  3,748
  5,590
  8,090
  11,387
  15,621
  20,927
  27,428
  35,234
  44,435
  55,101
  67,280
  81,000
  96,271
  113,088
  131,432
  151,277
  172,590
  195,338
  219,486
  245,003
  271,863
  300,047
  329,543
  360,346
  392,462
  425,905
  460,698
  496,873
  534,471
Total equity, $m
  884
  1,411
  2,173
  3,241
  4,690
  6,602
  9,057
  12,133
  15,902
  20,428
  25,763
  31,947
  39,008
  46,962
  55,816
  65,566
  76,201
  87,707
  100,064
  113,253
  127,253
  142,047
  157,621
  173,961
  191,062
  208,921
  227,541
  246,931
  267,103
  288,076
  309,875
Total liabilities and equity, $m
  2,421
  3,844
  5,921
  8,831
  12,780
  17,989
  24,678
  33,060
  43,330
  55,662
  70,198
  87,048
  106,288
  127,962
  152,087
  178,654
  207,633
  238,984
  272,654
  308,591
  346,739
  387,050
  429,484
  474,008
  520,605
  569,267
  620,003
  672,836
  727,801
  784,949
  844,346
Debt-to-equity ratio
  1.657
  1.670
  1.690
  1.700
  1.710
  1.710
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
  1.720
Adjusted equity ratio
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367
  0.367

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -10
  4
  2
  0
  -7
  -19
  -38
  -64
  -101
  -149
  -211
  -288
  -382
  -494
  -623
  -772
  -940
  -1,126
  -1,332
  -1,556
  -1,798
  -2,058
  -2,334
  -2,628
  -2,937
  -3,263
  -3,604
  -3,961
  -4,333
  -4,721
  -5,124
Depreciation, amort., depletion, $m
  78
  124
  191
  285
  413
  581
  797
  1,068
  1,399
  1,798
  2,267
  2,811
  3,432
  4,132
  4,911
  5,769
  6,705
  7,718
  8,805
  9,966
  11,197
  12,499
  13,870
  15,307
  16,812
  18,384
  20,022
  21,728
  23,503
  25,349
  27,267
Funds from operations, $m
  64
  128
  194
  285
  405
  562
  759
  1,004
  1,299
  1,649
  2,056
  2,523
  3,050
  3,639
  4,288
  4,997
  5,766
  6,591
  7,473
  8,410
  9,400
  10,442
  11,535
  12,680
  13,875
  15,121
  16,418
  17,768
  19,171
  20,628
  22,143
Change in working capital, $m
  2
  60
  86
  121
  164
  216
  278
  348
  426
  512
  603
  699
  798
  899
  1,001
  1,103
  1,203
  1,301
  1,397
  1,491
  1,583
  1,673
  1,761
  1,848
  1,934
  2,019
  2,106
  2,193
  2,281
  2,372
  2,465
Cash from operations, $m
  62
  68
  107
  164
  241
  345
  482
  656
  873
  1,137
  1,453
  1,823
  2,252
  2,739
  3,287
  3,895
  4,563
  5,290
  6,076
  6,918
  7,816
  8,769
  9,774
  10,832
  11,941
  13,101
  14,313
  15,575
  16,890
  18,257
  19,678
Maintenance CAPEX, $m
  0
  -78
  -124
  -191
  -285
  -413
  -581
  -797
  -1,068
  -1,399
  -1,798
  -2,267
  -2,811
  -3,432
  -4,132
  -4,911
  -5,769
  -6,705
  -7,718
  -8,805
  -9,966
  -11,197
  -12,499
  -13,870
  -15,307
  -16,812
  -18,384
  -20,022
  -21,728
  -23,503
  -25,349
New CAPEX, $m
  -1,020
  -857
  -1,241
  -1,738
  -2,360
  -3,112
  -3,996
  -5,007
  -6,136
  -7,368
  -8,684
  -10,067
  -11,495
  -12,949
  -14,413
  -15,872
  -17,313
  -18,730
  -20,116
  -21,470
  -22,791
  -24,084
  -25,351
  -26,601
  -27,838
  -29,073
  -30,312
  -31,564
  -32,838
  -34,143
  -35,486
Cash from investing activities, $m
  -1,127
  -935
  -1,365
  -1,929
  -2,645
  -3,525
  -4,577
  -5,804
  -7,204
  -8,767
  -10,482
  -12,334
  -14,306
  -16,381
  -18,545
  -20,783
  -23,082
  -25,435
  -27,834
  -30,275
  -32,757
  -35,281
  -37,850
  -40,471
  -43,145
  -45,885
  -48,696
  -51,586
  -54,566
  -57,646
  -60,835
Free cash flow, $m
  -1,065
  -866
  -1,258
  -1,766
  -2,404
  -3,179
  -4,095
  -5,149
  -6,331
  -7,630
  -9,029
  -10,510
  -12,054
  -13,642
  -15,259
  -16,888
  -18,520
  -20,145
  -21,758
  -23,356
  -24,940
  -26,512
  -28,076
  -29,638
  -31,205
  -32,783
  -34,383
  -36,011
  -37,677
  -39,389
  -41,157
Issuance/(repayment) of debt, $m
  702
  908
  1,315
  1,842
  2,500
  3,297
  4,234
  5,306
  6,501
  7,806
  9,201
  10,666
  12,179
  13,720
  15,271
  16,817
  18,344
  19,845
  21,313
  22,748
  24,148
  25,517
  26,860
  28,184
  29,496
  30,803
  32,116
  33,443
  34,793
  36,175
  37,598
Issuance/(repurchase) of shares, $m
  435
  523
  760
  1,068
  1,457
  1,931
  2,492
  3,140
  3,870
  4,675
  5,546
  6,472
  7,443
  8,448
  9,477
  10,522
  11,575
  12,632
  13,689
  14,744
  15,798
  16,852
  17,907
  18,968
  20,038
  21,122
  22,224
  23,350
  24,505
  25,694
  26,923
Cash from financing (excl. dividends), $m  
  1,132
  1,431
  2,075
  2,910
  3,957
  5,228
  6,726
  8,446
  10,371
  12,481
  14,747
  17,138
  19,622
  22,168
  24,748
  27,339
  29,919
  32,477
  35,002
  37,492
  39,946
  42,369
  44,767
  47,152
  49,534
  51,925
  54,340
  56,793
  59,298
  61,869
  64,521
Total cash flow (excl. dividends), $m
  67
  565
  817
  1,145
  1,554
  2,049
  2,631
  3,297
  4,040
  4,851
  5,718
  6,628
  7,568
  8,526
  9,490
  10,450
  11,399
  12,332
  13,245
  14,136
  15,006
  15,857
  16,692
  17,514
  18,329
  19,142
  19,958
  20,782
  21,621
  22,480
  23,364
Retained Cash Flow (-), $m
  -361
  -527
  -762
  -1,068
  -1,457
  -1,931
  -2,492
  -3,140
  -3,870
  -4,675
  -5,546
  -6,472
  -7,443
  -8,448
  -9,477
  -10,522
  -11,575
  -12,632
  -13,689
  -14,744
  -15,798
  -16,852
  -17,907
  -18,968
  -20,038
  -21,122
  -22,224
  -23,350
  -24,505
  -25,694
  -26,923
Prev. year cash balance distribution, $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 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
 
  38
  55
  76
  97
  118
  139
  157
  170
  176
  172
  156
  125
  78
  13
  -72
  -176
  -300
  -444
  -609
  -792
  -995
  -1,216
  -1,454
  -1,709
  -1,980
  -2,267
  -2,568
  -2,884
  -3,214
  -3,558
Discount rate, %
 
  10.60
  11.13
  11.69
  12.27
  12.88
  13.53
  14.21
  14.92
  15.66
  16.44
  17.27
  18.13
  19.04
  19.99
  20.99
  22.04
  23.14
  24.30
  25.51
  26.79
  28.12
  29.53
  31.01
  32.56
  34.19
  35.90
  37.69
  39.57
  41.55
  43.63
PV of cash for distribution, $m
 
  34
  44
  55
  61
  64
  65
  62
  56
  48
  38
  27
  17
  8
  1
  -4
  -7
  -9
  -9
  -8
  -7
  -5
  -4
  -3
  -2
  -1
  -1
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  54.2
  30.6
  18.0
  11.0
  6.9
  4.5
  3.0
  2.1
  1.4
  1.0
  0.8
  0.6
  0.4
  0.3
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0
  0.0

Preferred Apartment Communities, Inc. is a real estate investment trust externally managed by Preferred Apartment Advisors, LLC. The firm invests in real estate markets of the United States. It primarily acquires and operates multifamily apartment properties. The firm benchmarks the performance of its portfolio against the MSCI U. S. REIT Index and the S&P Small Cap 600 Index. Preferred Apartment Communities, Inc. was formed on September 18, 2009 and is based in the United States.

FINANCIAL RATIOS  of  Preferred Apartment Communities (APTS)

Valuation Ratios
P/E Ratio -48.5
Price to Sales 2.4
Price to Book 0.5
Price to Tangible Book
Price to Cash Flow 7.8
Price to Free Cash Flow -0.5
Growth Rates
Sales Growth Rate 83.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 140%
Cap. Spend. - 3 Yr. Gr. Rate 95.2%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 151.2%
Total Debt to Equity 165.7%
Interest Coverage 1
Management Effectiveness
Return On Assets 1.6%
Ret/ On Assets - 3 Yr. Avg. 1.8%
Return On Total Capital -0.6%
Ret/ On T. Cap. - 3 Yr. Avg. -0.1%
Return On Equity -1.4%
Return On Equity - 3 Yr. Avg. -0.3%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 79.5%
Gross Margin - 3 Yr. Avg. 81.5%
EBITDA Margin 53.5%
EBITDA Margin - 3 Yr. Avg. 50.4%
Operating Margin 15%
Oper. Margin - 3 Yr. Avg. 18.4%
Pre-Tax Margin -5%
Pre-Tax Margin - 3 Yr. Avg. -1.1%
Net Profit Margin -5%
Net Profit Margin - 3 Yr. Avg. -1.1%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio -570%

APTS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the APTS stock intrinsic value calculation we used $200 million for the last fiscal year's total revenue generated by Preferred Apartment Communities. The default revenue input number comes from 2016 income statement of Preferred Apartment Communities. 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 APTS stock valuation model: a) initial revenue growth rate of 59.5% 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 10.6%, whose default value for APTS is calculated based on our internal credit rating of Preferred Apartment Communities, 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 Preferred Apartment Communities.
    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 APTS stock the variable cost ratio is equal to 82.5%.

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 APTS 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 Preferred Apartment Communities.

Corporate tax rate of 27% is the nominal tax rate for Preferred Apartment Communities. 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 APTS 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 APTS are equal to 719.8%.

Life of production assets of 18.5 years is the average useful life of capital assets used in Preferred Apartment Communities 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 APTS is equal to 50%. 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 - $884 million for Preferred Apartment Communities - 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 23.808 million for Preferred Apartment Communities 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 Preferred Apartment Communities at the current share price and the inputted number of shares is $0.4 billion.

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COMPANY NEWS

▶ Preferred Apartment Communities reports 2Q results   [Jul-31-17 10:16PM  Associated Press]
▶ Preferred Apartment Communities reports 1Q results   [May-01-17 05:04PM  Associated Press]
▶ Atlanta developer acquires Publix-anchored shopping center in Cumming, Ga.   [Apr-26-17 07:32AM  American City Business Journals]
▶ 3 Secure Income Plays For 6.3% To 7.8% Yields   [Apr-23-17 08:38AM  Forbes]
▶ Top Ranked Income Stocks to Buy for March 20th   [Mar-20-17 10:46AM  Zacks]
Stock chart of APTS Financial statements of APTS
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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