Initiating Coverage: Inland Real Estate Income Trust
Inland Real Estate Income Trust, Inc. has received a “Buy” rating from TDR, indicating a positive outlook on its future financial performance. This rating stems from a detailed examination of the company’s financial statements, comparing its revenue and cash flow against industry standards, as well as an analysis of its financial stability and dividend payouts. The firm has set a one-year price target for Inland Real Estate Income Trust’s stock at $14.34. This target, along with expected dividends, suggests a potential 28% return.
Over the past twelve months and the preceding two years, the company reported revenues of $149.97 million. While this is below the industry median of $226.97 million, it represents a significant competitive effort. Inland Real Estate Income Trust has maintained a 100% revenue growth rate over this period, surpassing the industry’s 92.4% average and demonstrating its strong sales generation capabilities. It has achieved a 12% revenue growth rate, outpacing the industry median of 5%, indicating its ability to grow revenues more effectively than its competitors. However, the company has faced profitability issues, with a 0% net income growth rate over the same timeframe, significantly below the industry average of 53.3%, and a 20% decrease in net income, just under the industry median.
The company’s Levered Free Cash Flow (LFCF) stands at $29.05 million, below the industry median but still shows a 100% positive LFCF rate over the last two years, exceeding the industry average of 91.9%. This demonstrates the company’s steady cash flow generation capability, despite a 10% decline in LFCF over the past year, pointing to possible areas for operational improvements.
From a financial health standpoint, the Altman Z-Score of 0.47 indicates a higher risk of financial distress than the industry average of 2.40. However, the company offers a more attractive option for investors, with a 6.3% shareholder yield and a -0.2% buyback yield, both surpassing industry averages. Its debt-to-tangible equity ratio of 250.7% also suggests a stronger balance sheet compared to the industry’s 307.6%.
In terms of dividend performance, the company’s yield is at 4.6%, below the industry average. Yet, its dividend to LFCF yield ratio of 67.5% points to a more sustainable dividend payment approach than the industry’s 107.1%. Despite no dividend growth over the last year, the company has continued its payouts, showing resilience.
The stock valuation process, which includes a $0.76 dividend target from 45% of past LFCF, a 15X Dividend Multiple, and a 25% premium for dividend stability, leads to a Current Valuation of $14.34. This suggests the stock might be undervalued, presenting a potentially attractive investment as its intrinsic value appears higher than its market price.
The forecasted one-year price target and expected dividend indicate a total potential return of 28%, accounting for both anticipated price growth and dividend income. This projection acknowledges the speculative nature of such forecasts and the variability of future results.
