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AvalonBay Communities Inc AVB

Morningstar Rating
$183.69 +4.72 (2.64%)
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Company Report

Following Two Years of Rising Interest Rates, We Believe REITs Are Trading at Significant Discounts

We believe that there are several attractive opportunities across the US REIT sector for investors to consider. Following the recovery of many REIT sector fundamentals from the pandemic by mid-2021, we viewed the REIT sector as fairly valued through early 2022. However, the past two years have seen the rapid rise in interest rates and a slowing economy, which has led to major valuation declines across the sector. Our analysis of the REIT sector over the past 25 years suggests that the relative stock performance of REITs is negatively correlated with interest rate movements. The second and third quarters of 2023 saw large interest rate increases with the 10-year Treasury approaching 5%, which led to the sector underperforming. This occurred even as many REITs reported same-store net operating income, or NOI, growth at historical highs in 2022 due to high inflation. Higher interest rates, lower liquidity, tighter capital market conditions, and decelerating same-store NOI growth all led to a significant correction in the stock price for many REITs.

Price vs Fair Value

AVB is trading at a 15% discount.
Price
$182.01
Fair Value
$522.00
Uncertainty
Medium
1-Star Price
$846.76
5-Star Price
$184.60
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

AvalonBay has a history of finding accretive development opportunities to bolster its growth prospects.

Bears

The pandemic has made many millennials consider alternatives to urban apartments, including suburban apartments and single-family homeownership. This demographic has put off many major adult milestones but may finally be making the shift toward the suburbs.

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News

Trading Information

Previous Close Price
$178.97
Day Range
$180.44183.99
52-Week Range
$156.54198.66
Bid/Ask
$169.50 / $186.15
Market Cap
$26.09 Bil
Volume/Avg
984,631 / 811,002

Key Statistics

Price/Earnings (Normalized)
37.48
Price/Sales
9.40
Dividend Yield (Trailing)
3.62%
Dividend Yield (Forward)
3.70%
Total Yield
3.62%

Company Profile

AvalonBay Communities owns a portfolio of 281 apartment communities with over 87,000 units and is developing 18 additional properties with over 6,200 units. The company focuses on owning large, high-quality properties in major metropolitan areas of New England, New York/New Jersey, Washington D.C., California, and the Pacific Northwest.
Sector
Real Estate
Industry
REIT - Residential
Stock Style Box
Mid Value
Total Number of Employees
3,039

Competitors

Valuation

Metric
AVB
AIRC
ESS
Price/Earnings (Normalized)
37.487.3542.97
Price/Book Value
2.211.972.86
Price/Sales
9.405.859.29
Price/Cash Flow
16.8712.0915.80
Price/Earnings
AVB
AIRC
ESS

Financial Strength

Metric
AVB
AIRC
ESS
Quick Ratio
0.570.461.85
Current Ratio
0.760.531.88
Interest Coverage
5.566.272.81
Quick Ratio
AVB
AIRC
ESS

Profitability

Metric
AVB
AIRC
ESS
Return on Assets (Normalized)
4.86%10.92%3.10%
Return on Equity (Normalized)
8.64%31.64%6.87%
Return on Invested Capital (Normalized)
6.08%13.79%4.33%
Return on Assets
AVB
AIRC
ESS
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REIT - Residential Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
EQR
Equity ResidentialTylwkhdxkVjp$23.7 Bil
INVH
Invitation Homes IncLbvnffrHhmg$21.4 Bil
SUI
Sun Communities IncNxnjqcgTkcwn$15.7 Bil
ESS
Essex Property Trust IncNfdbddpmvNtqx$15.5 Bil
MAA
Mid-America Apartment Communities IncXrqrl$15.3 Bil
AMH
American Homes 4 Rent Class AGzv$13.3 Bil
UDR
UDR IncTrxm$12.2 Bil
ELS
Equity Lifestyle Properties IncMqgcrbhgHmytw$12.0 Bil
AIRC
Apartment Income REIT Corp Class AKgpgnxvgJff$4.6 Bil

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