Initiating Coverage: One Liberty Properties Inc
One Liberty Properties Inc. has been given a “Buy” rating with a one-year target of $35.83, which suggests a potential increase of 71%. This rating reflects the company’s performance compared to its competitors and the positive outlook on its financial health and operational efficiency.
The analysis starts with the company’s income statement, showing revenue of $210 million. Although slightly below the industry average, this far exceeds its closest competitor’s revenue of $89.74 million, indicating a competitive advantage. However, the company has shown inconsistency in revenue growth over the last two years, achieving a 50% positive revenue growth rate compared to the industry’s 92.4%, raising questions about its revenue stability. Despite these concerns, One Liberty Properties has shown impressive growth in net income, with a 103% increase that significantly outperforms its competitor’s 33% decline and the industry’s average, indicating strong profitability improvement.
Looking at the company’s cash flow, the Levered Free Cash Flow (LFCF) is $29.95 million, which is below the industry average, pointing to difficulties in generating cash after financial costs. Nonetheless, the company has managed to maintain a 100% positive LFCF rate over the last two years. This shows stability, despite a 67% decrease in LFCF over the past year, suggesting operational and financial challenges.
Further analysis highlights the company’s strong position against financial distress, as seen in its Altman Z-Score of 6.16, which is well above the industry average. However, the negative Shareholder Yield of -268.5% indicates disappointing returns to shareholders. Additionally, the company’s high Debt to Tangible Equity Ratio suggests a heavy reliance on debt, which could pose challenges in managing shareholder returns and leveraging.
The dividend analysis shows an 11.2% yield, exceeding the sector and industry averages, which points to a strong current performance. However, the Dividend Yield / LFCF Yield ratio raises concerns about the sustainability of dividends, especially with a notable decrease in dividend growth over the last year, questioning the future of dividend distributions.
Share valuation includes the Dividend Target, based on 45% of LFCF, and applies a 15X Dividend Multiple, demonstrating the company’s dividend payout capacity and investment potential. The Current Valuation, when compared to market price, suggests One Liberty Properties, Inc. is undervalued, with a promising return outlook.
The expected one-year performance predicts a substantial increase in stock value to $35.83, with a 71% return potential, based on stock price movements and dividend forecasts. This outlook, combined with a projected dividend of $1.91, emphasizes the company’s solid cash flow and effective payout strategy.
One Liberty Properties, Inc. shows strong recovery and growth potential. Its significant net income growth, consistent cash flows, and solid financial health, along with an attractive dividend yield and share valuation, support the “Buy” rating and the expectation of considerable returns. Investors should consider the company’s strong performance prospects in light of its operational challenges and market volatility.
