Innovative industrial properties (WKN: A2DGXH) has also now presented a new set of quarterly figures. So far, management has met expectations. No more or less. The stock was not very dynamic, but this may be a sign of relaxation after an unstable phase.
But today we want to take the opportunity to discuss another topic: fundamental valuation. Let’s look at Innovative Industrial Properties and how we got a price-to-earnings (P/E) ratio of 12. At least approximately.
Innovative industrial properties: Affordable!
Innovative Industrial Properties last reported funds from operations per share of $1.97. Both nominally and on a normalized basis. We use this value, although we could even use an adjusted value that would be significantly higher at $2.14.
This is again compared to a current share price of US$94.74. From this value, we get a price-to-FFO ratio of around 12. To me, this should be used synonymously with the price-to-earnings ratio at this point. The funds from the operation are essentially the profit from the rental and leasing business.
Regarding Innovative Industrial Properties, it shows me that the market does not know how to assess the current situation. Recently, there have been reports that a tenant has not been able to fulfill his obligations. Interest rates are also rising and the market environment is changing. Nevertheless, this is offset by clear double-digit growth. For funds from operations, it even increased by 26.3% year-on-year. Actually, the premium should be significantly larger with these key figures.
Innovative Industrial Properties has a dividend yield of over 7%. It’s a value that even seems very sustainable with a quarterly dividend of $1.75 and has a safety buffer. For me, this is still a good option. A high-performance option, but with certain risks.
risk with an opportunity
Of course: Innovative industrial properties have some risks. An impending rental loss. If it goes badly, more may follow. The cannabis industry could be vulnerable to a downturn. It would be the first to hit the industry financially.
Nevertheless, there has recently been growth in the key figure for funds from operations. Now the price to FFO ratio is only 12. Considering many factors, I think it’s worth a closer look from a long-term perspective. At least for investors who can tolerate volatility and risk for solid growth potential.
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Vincent owns shares in Innovative Industrial Properties. The Motley Fool owns shares of and recommends Innovative Industrial Properties.