Real Estate
Economic earnings, the true cash flows of the business, have plummeted from $47m in 2011 to negative $743m over the TTM. Falling NOPAT margins and invested capital turns have driven ROIC from 7% to 3%. To justify its current price, Realty Income must improve its NOPAT margin to 49% (vs. 36% TTM) and grow revenue by 14% compounded annually for the next decade. Given that NOPAT has grown by just 8% compounded annually since 2016 these expectations look overly optimistic. 40%+ downside.
Edition: 142
- 19 August, 2022