A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. As 2013 begins, I would like to focus on a REIT that is a trailblazer in the storage facility industry: Public Storage (NYSE:PSA) .
The Business:
Warren Buffett once said, “Never invest in a business you can’t understand.” This not only allows the investor to purchase a company with conviction, but also allows them to spot trends blind to unfamiliar eyes. With this in mind, investors in any company should fully understand the business model of the company. Public Storage is a real estate investment trust that invests in self-storage facilities and offers them for lease. The company operates throughout the United States, the United Kingdom, France, Belgium, Germany, Sweden, Denmark, and the Netherlands. As of the end of 2011, the company possessed 2,349 total locations with 168,051,000 rentable square feet. Based on market capitalization, Public Storage is valued at $25.96 billion. Because of the company’s efficient business model, their profit margin is 42.81%.
Strengths:
- Institutional Vote of Confidence: 76.93% of shares outstanding are held by institutional investors, displaying the confidence some of the largest investors in the world have in the company and its future
- Dividend: Currently, Public Storage pays out quarterly dividends of $1.10, which when annualized puts the dividend as yielding 2.91%
- Steady Revenue Growth: In 2006, Public Storage reported revenue of $1.38 billion; in 2011, the company announced revenue of $1.60 billion, representing year over year annual growth of 3.00%, a steady trend that is anticipated to continue into the future, with projections placing 2016 revenue at $1.87 billion
- Relatively Low Volatility: Presently, Public Storage holds a beta ratio of 0.93, representing a company trading with less volatility than the overall market, a major upside for long-term investors
- Diversified Property Portfolio: As of the end of 2011, the company possessed 2,349 total properties with 168,051,000 total net rentable square feet, with properties stretching across the United States and several countries in Europe, and with this diversified property portfolio comes a greater level of security and predictability for investors
- Free Cash Flow Position: As of the company’s latest quarterly report, Public Storage possesses a positive free cash flow position of $327.99 million, allowing the company to reward investors and reinvest in their own business
- Streamlining of Business: Total expenses have decreased from $1.37 billion in 2007 to only $978 million currently, representing a streamlining of the business that has not confiscated revenue growth
- Net Positive Cash Position: The company’s debt load of $30.40 million is outweighed by the company’s $535.75 million worth of cash and cash equivalents, representing a slight net positive cash position
