Long-established in the REITs industry, RPT Realty (RPT, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 19.75%, juxtaposed with a three-month change of 26.62%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of RPT Realty.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- 1. Financial strength rank: 3/10
- 2. Profitability rank: 6/10
- 3. Growth rank: 3/10
- 4. GF Value rank: 5/10
- 5. Momentum rank: 8/10
Based on the above method, GuruFocus assigned RPT Realty the GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding RPT Realty's Business
RPT Realty is a self-managed real estate investment trust that invests in and manages retail properties. The company owns and operates a national portfolio of open-air shopping destinations principally located in top U.S. markets. The Company's shopping centers offer diverse, locally-curated consumer experiences that reflect the lifestyles of their surrounding communities and meet the modern expectations of the Company's retail partners. The Company's property portfolio consisted of 44 wholly-owned shopping centers, 13 shopping centers owned through its grocery-anchored joint venture, 48 retail properties owned through its net lease joint venture and one net lease retail property that was held for sale by the Company which together represent 15.0 million square feet of gross leasable area.
Financial Strength Breakdown
RPT Realty's financial strength indicators present some concerning insights about the company's balance sheet health. RPT Realty has an interest coverage ratio of 0.85, which positions it worse than 92.69% of 643 companies in the REITs industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Scoreis just 0.46, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.01 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 4.62, which is above Joel Tillinghast's warning level of 4 and is better than 74.96% of 559 companies in the REITs industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Growth Prospects
A lack of significant growth is another area where RPT Realty seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -1.6 per year over the past three years, which underperforms worse than 63.88% of 634 companies in the REITs industry. Stagnating revenues may pose concerns in a fast-evolving market.
Over the past five years, RPT Realty has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -1, while the five-year growth rate is at -1.8. These figures underscore potential challenges in the company's profitability. Lastly, RPT Realty predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While RPT Realty has a commendable history, the current indicators suggest that it may struggle to maintain its performance in the future. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
