Weaknesses:
- Slightly High Valuation: Currently, Public Storage carries a price earnings ratio of 42.48, a price to book ratio of 4.97, and a price to sales ratio of 14.82, all of which indicates a company trading with a slightly high valuation. However some of this valuation is compensated through the company’s extreme predictability and diversification
- Concentration in US: 91.95% of the company’s total properties are located in the United States, and this extreme concentration in the US could prove to be a major weakness
Opportunities:
- Dividend Growth: Since implementing their dividend program in 1981, Public Storage has consistently raised their dividend payouts and should continue to do so well into the future
- Expansion: In 2011, $69 million was derived from newly acquired or redeveloped properties in the United States, and $22 million was derived from newly acquired or developed properties in Europe, and further expansion plans could offer incredible opportunity to the company
- Increasing Occupancy Rate: Public Storage possessed an occupancy rate in its United States business segment in 2011 over 91%, and in the company’s European segment an occupancy rate of 83.9%; any improvement in the company’s occupancy rate could result in sales growth
Threats:
- Sluggishness in Consumer Confidence: When consumer confidence lags, they do not spend as much money and do not acquire as many excessive products, leading to less demand for storage facilities, posing a threat to Public Storage
Competitors:
Major publicly traded competitors of Public Storage include Simon Property Group, Inc. (NYSE:SPG), HCP, Inc. (NYSE:HCP), Ventas, Inc. (NYSE:VTR), and Equity Residential (NYSE:EQR). These companies do not compete directly against Public Storage, but are all real estate investment trusts and invest in their own distinct breed of property. Simon Property Group is valued at $49.55 billion, pays out a dividend yielding 2.88%, and carries a price earnings ratio of 33.47. HCP is valued at $21.67 billion, pays out a dividend yielding 4.39%, and carries a price earnings ratio of 25.67. Ventas is valued at $20.28 billion, pays out a dividend yielding 3.57%, and carries a price earnings ratio of 67.19. Equity Residential is valued at $18.69 billion, pays out a dividend yielding 5.34%, and carries a price earnings ratio of 71.56.
The Foolish Bottom Line:
Financially, Public Storage is as solid as a rock. The company possesses steady revenue growth, a double digit profit margin, and a rapidly growing dividend. The only true weakness of the business is its high valuation, but this is compensated for through the company’s extreme predictability and security. All in all, Public Storage is an incredibly stable investment that should hand investors solid returns for as long as there is a demand for storage facilities.
The article Is This A Company Investors Should Store Their Money In? originally appeared on Fool.com and is written by Ryan Guenette.
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