Intrinsic value of Armada Hoffler Properties - AHH

Previous Close

$13.47

  Intrinsic Value

$1.84

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  Rating & Target

str. sell

-86%

Previous close

$13.47

 
Intrinsic value

$1.84

 
Up/down potential

-86%

 
Rating

str. sell

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

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

We calculate the intrinsic value of AHH 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.

Please visit our new site that uses elements of artificial intelligence for stock valuation: artificial intelligence value of Armada Hoffler Properties (AHH) stock.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

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, %
  2.38
  6.30
  6.17
  6.05
  5.95
  5.85
  5.77
  5.69
  5.62
  5.56
  5.50
  5.45
  5.41
  5.37
  5.33
  5.30
  5.27
  5.24
  5.22
  5.20
  5.18
  5.16
  5.14
  5.13
  5.12
  5.10
  5.09
  5.08
  5.08
  5.07
  5.06
Revenue, $m
  258
  274
  291
  309
  327
  346
  366
  387
  409
  432
  455
  480
  506
  533
  562
  592
  623
  655
  690
  725
  763
  802
  844
  887
  932
  980
  1,030
  1,082
  1,137
  1,194
  1,255
Variable operating expenses, $m
 
  245
  261
  276
  293
  310
  328
  346
  366
  386
  408
  430
  453
  477
  503
  529
  557
  587
  617
  649
  683
  718
  755
  794
  834
  877
  921
  968
  1,017
  1,069
  1,123
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
  232
  245
  261
  276
  293
  310
  328
  346
  366
  386
  408
  430
  453
  477
  503
  529
  557
  587
  617
  649
  683
  718
  755
  794
  834
  877
  921
  968
  1,017
  1,069
  1,123
Operating income, $m
  27
  29
  31
  32
  34
  36
  38
  41
  43
  45
  48
  50
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  89
  93
  98
  103
  108
  114
  119
  125
  132
EBITDA, $m
  62
  66
  70
  74
  79
  83
  88
  93
  98
  104
  109
  115
  122
  128
  135
  142
  150
  158
  166
  174
  183
  193
  203
  213
  224
  235
  247
  260
  273
  287
  302
Interest expense (income), $m
  15
  18
  20
  22
  24
  26
  28
  30
  33
  35
  38
  41
  43
  46
  49
  53
  56
  59
  63
  67
  71
  75
  80
  84
  89
  94
  100
  105
  111
  118
  124
Earnings before tax, $m
  43
  11
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  10
  9
  9
  9
  9
  9
  9
  9
  9
  9
  8
  8
  8
  8
  8
  8
Tax expense, $m
  0
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  3
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
  2
Net income, $m
  28
  8
  8
  8
  8
  8
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  22
  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
  982
  1,020
  1,082
  1,148
  1,216
  1,287
  1,362
  1,439
  1,520
  1,605
  1,693
  1,785
  1,882
  1,983
  2,088
  2,199
  2,315
  2,436
  2,563
  2,696
  2,836
  2,982
  3,136
  3,296
  3,465
  3,642
  3,827
  4,022
  4,226
  4,440
  4,665
Adjusted assets (=assets-cash), $m
  960
  1,020
  1,082
  1,148
  1,216
  1,287
  1,362
  1,439
  1,520
  1,605
  1,693
  1,785
  1,882
  1,983
  2,088
  2,199
  2,315
  2,436
  2,563
  2,696
  2,836
  2,982
  3,136
  3,296
  3,465
  3,642
  3,827
  4,022
  4,226
  4,440
  4,665
Revenue / Adjusted assets
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
  0.269
Average production assets, $m
  667
  709
  753
  798
  846
  895
  947
  1,001
  1,057
  1,116
  1,177
  1,241
  1,309
  1,379
  1,452
  1,529
  1,610
  1,694
  1,782
  1,875
  1,972
  2,074
  2,180
  2,292
  2,410
  2,532
  2,661
  2,797
  2,939
  3,088
  3,244
Working capital, $m
  0
  -23
  -25
  -26
  -28
  -29
  -31
  -33
  -35
  -37
  -39
  -41
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -65
  -68
  -72
  -75
  -79
  -83
  -88
  -92
  -97
  -102
  -107
Total debt, $m
  522
  574
  629
  686
  745
  807
  871
  939
  1,009
  1,082
  1,159
  1,239
  1,323
  1,411
  1,503
  1,599
  1,700
  1,805
  1,916
  2,031
  2,153
  2,280
  2,413
  2,553
  2,699
  2,853
  3,014
  3,183
  3,361
  3,547
  3,742
Total liabilities, $m
  834
  886
  941
  998
  1,057
  1,119
  1,183
  1,251
  1,321
  1,394
  1,471
  1,551
  1,635
  1,723
  1,815
  1,911
  2,012
  2,117
  2,228
  2,343
  2,465
  2,592
  2,725
  2,865
  3,011
  3,165
  3,326
  3,495
  3,673
  3,859
  4,054
Total equity, $m
  148
  134
  142
  150
  159
  169
  178
  189
  199
  210
  222
  234
  247
  260
  274
  288
  303
  319
  336
  353
  372
  391
  411
  432
  454
  477
  501
  527
  554
  582
  611
Total liabilities and equity, $m
  982
  1,020
  1,083
  1,148
  1,216
  1,288
  1,361
  1,440
  1,520
  1,604
  1,693
  1,785
  1,882
  1,983
  2,089
  2,199
  2,315
  2,436
  2,564
  2,696
  2,837
  2,983
  3,136
  3,297
  3,465
  3,642
  3,827
  4,022
  4,227
  4,441
  4,665
Debt-to-equity ratio
  3.527
  4.300
  4.430
  4.560
  4.680
  4.780
  4.880
  4.980
  5.070
  5.150
  5.230
  5.300
  5.370
  5.430
  5.490
  5.550
  5.600
  5.660
  5.700
  5.750
  5.790
  5.830
  5.870
  5.910
  5.950
  5.980
  6.010
  6.040
  6.070
  6.100
  6.120
Adjusted equity ratio
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131
  0.131

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  28
  8
  8
  8
  8
  8
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  7
  6
  6
  6
  6
  6
  6
  6
  6
  6
  6
Depreciation, amort., depletion, $m
  35
  37
  39
  42
  44
  47
  50
  52
  55
  58
  62
  65
  69
  72
  76
  80
  84
  89
  93
  98
  103
  109
  114
  120
  126
  133
  139
  146
  154
  162
  170
Funds from operations, $m
  69
  45
  47
  49
  52
  54
  57
  60
  63
  66
  69
  72
  76
  79
  83
  87
  91
  96
  100
  105
  110
  115
  121
  126
  132
  139
  145
  152
  160
  167
  175
Change in working capital, $m
  9
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
Cash from operations, $m
  60
  46
  48
  51
  53
  56
  59
  62
  65
  68
  71
  74
  78
  82
  85
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  143
  150
  157
  164
  172
  181
Maintenance CAPEX, $m
  0
  -35
  -37
  -39
  -42
  -44
  -47
  -50
  -52
  -55
  -58
  -62
  -65
  -69
  -72
  -76
  -80
  -84
  -89
  -93
  -98
  -103
  -109
  -114
  -120
  -126
  -133
  -139
  -146
  -154
  -162
New CAPEX, $m
  -260
  -42
  -44
  -46
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -64
  -67
  -70
  -73
  -77
  -81
  -84
  -88
  -93
  -97
  -102
  -107
  -112
  -117
  -123
  -129
  -135
  -142
  -149
  -156
Cash from investing activities, $m
  -226
  -77
  -81
  -85
  -89
  -93
  -99
  -104
  -108
  -114
  -119
  -126
  -132
  -139
  -145
  -153
  -161
  -168
  -177
  -186
  -195
  -205
  -216
  -226
  -237
  -249
  -262
  -274
  -288
  -303
  -318
Free cash flow, $m
  -166
  -31
  -32
  -34
  -36
  -38
  -40
  -42
  -44
  -46
  -49
  -52
  -54
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
  -112
  -118
  -124
  -131
  -137
Issuance/(repayment) of debt, $m
  130
  52
  55
  57
  59
  62
  65
  67
  70
  73
  77
  80
  84
  88
  92
  96
  101
  105
  110
  116
  121
  127
  133
  140
  147
  154
  161
  169
  177
  186
  195
Issuance/(repurchase) of shares, $m
  68
  0
  1
  1
  1
  2
  2
  3
  3
  4
  4
  5
  6
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  17
  18
  20
  21
  22
  24
Cash from financing (excl. dividends), $m  
  196
  52
  56
  58
  60
  64
  67
  70
  73
  77
  81
  85
  90
  94
  99
  104
  109
  114
  120
  127
  133
  140
  147
  155
  163
  171
  179
  189
  198
  208
  219
Total cash flow (excl. dividends), $m
  29
  21
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  38
  40
  42
  44
  46
  48
  51
  53
  56
  59
  61
  64
  68
  71
  74
  78
  82
Retained Cash Flow (-), $m
  -98
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -16
  -17
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
Prev. year cash balance distribution, $m
 
  22
  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
 
  36
  15
  15
  16
  17
  17
  18
  19
  20
  21
  22
  22
  24
  25
  26
  27
  28
  30
  31
  33
  34
  36
  37
  39
  41
  43
  45
  48
  50
  52
Discount rate, %
 
  11.40
  11.97
  12.57
  13.20
  13.86
  14.55
  15.28
  16.04
  16.84
  17.69
  18.57
  19.50
  20.47
  21.50
  22.57
  23.70
  24.88
  26.13
  27.44
  28.81
  30.25
  31.76
  33.35
  35.02
  36.77
  38.60
  40.53
  42.56
  44.69
  46.92
PV of cash for distribution, $m
 
  32
  12
  11
  10
  9
  8
  7
  6
  5
  4
  3
  3
  2
  2
  1
  1
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  99.9
  99.8
  99.6
  99.4
  99.2
  98.9
  98.6
  98.3
  98.0
  97.6
  97.2
  96.7
  96.3
  95.8
  95.4
  94.9
  94.3
  93.8
  93.3
  92.7
  92.1
  91.6
  91.0
  90.4
  89.8
  89.1
  88.5
  87.9
  87.3

Armada Hoffler Properties, Inc. is a real estate company. The Company is engaged in developing, building, owning and managing institutional-grade office, retail and multifamily properties in various markets throughout the Mid-Atlantic and Southeastern United States. In addition to the ownership of its operating property portfolio, the Company develops and builds properties for its own account and through joint ventures between the Company and unaffiliated partners. It also provides general contracting services to third parties. Its construction and development experience includes mid- and high-rise office buildings, retail strip malls and retail power centers, multifamily apartment communities, hotels and conference centers, single- and multi-tenant industrial, distribution and manufacturing facilities, educational, medical and special purpose facilities, government projects, parking garages and mixed-use town centers.

FINANCIAL RATIOS  of  Armada Hoffler Properties (AHH)

Valuation Ratios
P/E Ratio 18
Price to Sales 2
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 8.4
Price to Free Cash Flow -2.5
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 106.3%
Cap. Spend. - 3 Yr. Gr. Rate 40.8%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 352.7%
Total Debt to Equity 352.7%
Interest Coverage 4
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 4.7%
Return On Total Capital 5.1%
Ret/ On T. Cap. - 3 Yr. Avg. 4.3%
Return On Equity 28.3%
Return On Equity - 3 Yr. Avg. 26.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 28.3%
Gross Margin - 3 Yr. Avg. 26.7%
EBITDA Margin 36%
EBITDA Margin - 3 Yr. Avg. 29.4%
Operating Margin 10.1%
Oper. Margin - 3 Yr. Avg. 11%
Pre-Tax Margin 16.7%
Pre-Tax Margin - 3 Yr. Avg. 12.2%
Net Profit Margin 10.9%
Net Profit Margin - 3 Yr. Avg. 7.9%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 0%
Payout Ratio 121.4%

AHH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AHH stock intrinsic value calculation we used $258 million for the last fiscal year's total revenue generated by Armada Hoffler Properties. The default revenue input number comes from 2016 income statement of Armada Hoffler Properties. 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 AHH stock valuation model: a) initial revenue growth rate of 6.3% 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 11.4%, whose default value for AHH is calculated based on our internal credit rating of Armada Hoffler Properties, 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 Armada Hoffler Properties.
    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 AHH stock the variable cost ratio is equal to 89.5%.

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 AHH 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 Armada Hoffler Properties.

Corporate tax rate of 27% is the nominal tax rate for Armada Hoffler Properties. 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 AHH 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 AHH are equal to 258.5%.

Life of production assets of 19.1 years is the average useful life of capital assets used in Armada Hoffler Properties 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 AHH is equal to -8.5%. 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 - $148 million for Armada Hoffler Properties - 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 62.346 million for Armada Hoffler Properties 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 Armada Hoffler Properties at the current share price and the inputted number of shares is $0.8 billion.

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COMPANY NEWS

▶ Armada Hoffler Properties, Inc. to Host Earnings Call   [Feb-06-18 06:45AM  ACCESSWIRE]
▶ Armada Hoffler Properties reports 4Q results   [06:19AM  Associated Press]
▶ 5 Stocks That Look Good Short   [Jan-13-18 12:00PM  TheStreet.com]
▶ Armada Hoffler Properties reports 3Q results   [06:19AM  Associated Press]
▶ Armada Hoffler Properties reports 2Q results   [Aug-01-17 10:56PM  Associated Press]
▶ Armada Hoffler Properties Dividend Yield   [Jul-26-17 12:09PM  Market Realist]
▶ Armada Hoffler Properties Added to S&P SmallCap 600 Index   [Jun-13-17 04:26PM  Business Wire]
▶ New Strong Sell Stocks for February 17th   [Feb-17-17 09:33AM  Zacks]
▶ Is Armada Hoffler Properties Inc (AHH) A Good Stock To Buy?   [Dec-12-16 01:53AM  at Insider Monkey]
Financial statements of AHH
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