Public Storage (NYSE:PSA)

CAPS Rating: 3 out of 5

The Company is a fully integrated, self-administered and self-managed REIT that acquires, develops, owns and operates self-storage facilities.

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Member Avatar BaseBawl (< 20) Submitted: 5/6/2014 8:10:33 AM : Outperform Start Price: $168.30 PSA Score: +0.45

Sizemore retirement reit with increasing dividends.

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Member Avatar grankh (77.44) Submitted: 4/14/2014 6:43:00 PM : Outperform Start Price: $166.58 PSA Score: +1.43

This is a real-life holding of mine through my investment club, (we just bought it), and I plan on buying for my personal account this week.

Sales have gone up about 6% over each of the past 3 years. EPS has gone up over 20% for each of the past 2 years. The pretax profit margin has been increasing in each of the past 3 years, as has the earned-on-equity. The debt has gone up in each of the past two years, which I don't like, but it was only at 16% DTE last year, so I am not too worried about it yet. Even if rates go up, the company should not be too overly burdened by the debt service. However, if the debt does keep going up, then I will start to worry.

The current P/E is lower than the average over the last 4 years, so that is good, though the high P/E's have been falling over the past 3 years, so the top end of the multiple that people are willing to pay for this stock is going down. That will put some pressure on the stock price going forward.

The PEG ratio is quite high at 1.72, so this is not a cheap stock by that standard. It does pay a decent dividend of about 3.5%, (due to this being a REIT). Not a great yield, but not too bad either.

I think this stock could almost triple over the next 5 years, if things keep going the way they have been over the past few years. Add in a good dividend yield and this stock could potentially earn me 25% per year for the next 5 years. That is what I am hoping for anyway. We'll see how I do.

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Member Avatar CarthAnne (57.93) Submitted: 3/7/2014 3:09:10 PM : Outperform Start Price: $163.57 PSA Score: +3.71

High growth. Reasonable P/E.

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Member Avatar paek813 (99.68) Submitted: 6/27/2013 6:40:22 PM : Outperform Start Price: $146.89 PSA Score: -2.21

S&P 5 STAR (strong buy)

S&P Fair Value Rank is [1] (overvalued)
- This rank ranges from [1] - most overvalued to [5] - most undervalued

Fair Value Calculation is [$124.50]
- Analysis of the stock's current worth, based on S&P's proprietary quantitative model suggests that PSA is overvalued by $25.23 or 16.9%
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This real estate investment trust (REIT) primarily invests in self-service storage facilities (mini-warehouses), but also has commercial and industrial properties.
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We have a strong buy recommendation on PSA shares. We see the trust benefiting from its ability to continue to gain share at the expense of smaller competitors. The trust is capitalizing on strong brand recognition to offer an array of customer services that many small competitors cannot provide. We expect ongoing industry consolidation to favor larger industry players, such as PSA, particularly through acquisitions. Also, given its size versus the competition, the trust has significant market and pricing power, in our view. We also view the trust's capital structure, which is dominated by preferred and common equity, as well as its very modest debt burden and large cash balances, as positive factors in our favorable evaluation.

Our 12-month target price of $182 is equal to 25.8X our 2013 FFO per share estimate of $7.05, a premium to peers with greater financial leverage. We think a premium valuation will be maintained as FFO climbs, driven by organic growth and contributions from acquisitions.

Risks to our recommendation and target price include slower-than-expected growth in rental rates and occupancy levels, a sharp drop in moving activity, and higher interest rates.
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We forecast revenues will expand 7.7% in 2013. We expect PSA's U.S. operations to show steady improvement, offsetting weakness in overseas markets. We forecast the year-end domestic occupancy will reach 93.3%, up from 91.8% at the end of 2012. We think the trust will continue to benefit from industry consolidation, select acquisitions, and less competitive price discounting. In addition, move-in rates should improve along with local economic conditions. We expect 2013 average rental rates to rise close to 6.0%.

We think PSA's 49% equity interest in Shurgard Europe may limit overall earnings gains in 2013. During the first quarter, Shurgard's occupancy slipped to 80.4%, from 83.7% last year. We expect operating conditions, reflecting weak local economies, to remain challenging in coming quarters.

We estimate FFO per share of $7.05 for 2013, expanding to $7.30 in 2014. Our outlook reflects higher occupancy levels, increased rental rates, and lower promotional spending as market conditions improve. We exclude the impact of fluctuations in foreign current exchange rates.
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SUB-INDUSTRY (specialized REITs) / PEER OUTLOOK

We have a neutral fundamental outlook on the specialized REITs sub-industry.

This group is composed of real estate investment trusts in diverse categories including hospitality, health care, self-storage, timber, and specialty. We believe modest increases in job growth are beginning to increase demand in most real estate sectors. By our analysis, limited new supply has helped reduce competition in many verticals, resulting in moderate revenue and earnings gains, on average, in 2012. However, we think an expanding pipeline of new construction projects could pose more of a threat to REITs in 2013. We think credit market conditions have become more accommodating to public REITs considering acquisitions or new development of commercial properties in coming months.

Demand for self-storage, which is heavily tied to household moving activity, has held up well given the still relatively weak state of the economy. Many self-storage providers are instituting price increases and curbing the level of discounting to maintain occupancy.

Year to date through May 31, the S&P Specialized REITs Index rose 8.1%, versus a 14.5% gain for the S&P 1500 Index. As of April 30, average dividend yields were 4.0% for health care REITs, 2.9% for self-storage, 2.8% for lodging/resorts and 2.7% for timber REITs.

-- R. Shepard, CFA
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S&P Analyst Research Notes / News

May 31, 2013

S&P RAISES OPINION ON SHARES OF PUBLIC STORAGE TO STRONG BUY FROM BUY (PSA 153.3*****):

Our opinion change is based on valuation as we note recent price weakness in the shares. We keep our $182 target price, 25.8X our 2013 $7.05 FFO estimate, a premium to peers. The shares pay a $5.00 annual dividend, recently yielding 3.3%, adding to total return potential. As the economy recovers, we think PSA will benefit from less competitive price discounting. In addition, its strong brand awareness and an effective Internet advertising campaign should push occupancy higher. We forecast year-end 2013 occupancy will reach 93.3%, up from 91.8% at the end of 2012.

-- Royal Shepard, CFA

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Member Avatar Bobmoll36 (42.73) Submitted: 1/4/2013 1:59:56 PM : Outperform Start Price: $137.15 PSA Score: -5.95

Housing slowly coming back but rentals are soaring. folks need to move to smaller space and will store their valuables. Div is 3.2%

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Member Avatar hawki2sl (< 20) Submitted: 3/9/2011 5:37:26 PM : Underperform Start Price: $98.75 PSA Score: -30.49

Over valued

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Member Avatar Cjbrat1 (29.38) Submitted: 1/7/2011 4:57:50 PM : Underperform Start Price: $89.75 PSA Score: -43.90

P/E ratio points to a share price that is unsustainable in the long term. If you have a RL position, you would be wise to close it and leave while you are ahead.

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Member Avatar randyherring (< 20) Submitted: 12/10/2010 8:57:27 AM : Outperform Start Price: $87.27 PSA Score: +46.60

good balance sheet

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Member Avatar gunterle (66.29) Submitted: 10/20/2010 11:05:48 AM : Outperform Start Price: $86.84 PSA Score: +45.60

Trendspotter

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Member Avatar kurtdabear (32.52) Submitted: 3/1/2010 1:36:25 PM : Underperform Start Price: $72.67 PSA Score: -71.12

PSA has been a good performer over the years, but I see hard times ahead. When people are having trouble keeping their houses, they're not going to stay current on the storage units where they keep their extra "stuff."

In my city, legal ads announcing public auctions of the contents of storage units that are in arrears are now commonly found intermingled with the foreclosure and tax-sale notices that fill several pages each day in the local newspapers.

That bodes ill for a company with a large stake in that market. Their commercial and container segments also stand to suffer from the U.S. consumers new-found frugality.

As income falls, dividends fall, and since people buy REIT's for dividends, the price will go down with the dividends.

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Member Avatar gunark (64.11) Submitted: 7/14/2009 10:30:30 AM : Underperform Start Price: $54.59 PSA Score: -111.39

CRE

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Member Avatar MRSTARBUCKS (99.29) Submitted: 5/19/2009 3:27:12 PM : Outperform Start Price: $55.60 PSA Score: +106.57

GOOD PLACE TO GO

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Member Avatar COOLSTOCK (71.63) Submitted: 5/14/2009 1:14:28 PM : Outperform Start Price: $53.06 PSA Score: +117.14

good stock

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Member Avatar NostraDodger (< 20) Submitted: 1/10/2009 10:03:49 PM : Underperform Start Price: $55.16 PSA Score: -100.51

I can't say whether this stock will under perform the S&P, because they're both going to take a beating. That said; Public Storage will come down hard, because we're in the grips of deflation.

Who, in their right mind, will pay to store old junk; when they can use this money to buy new items at 90% off? When money gets tighter, which it will, you can expect to see storage renters take a hike - and leave the owners with this junk to haul away.

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Member Avatar gsb1027 (< 20) Submitted: 11/17/2008 11:30:39 AM : Outperform Start Price: $52.14 PSA Score: +110.82

This company has low debt and public storage demand is much more stable over time than demand for most product or service.

The preferred stock is an even better deal. You can earn around a

9% yield due to the discount on the shares and when the market recovers in the next 2-3 years, you get capital gains in excess of 25%. Not bad for an extremely safe investment.

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Member Avatar cfackler (95.48) Submitted: 11/9/2008 8:47:23 AM : Outperform Start Price: $63.00 PSA Score: +72.38

As a 'Buy and Holder' with a time frame of 5 - 10 years, I like many things about this company:

Insider ownership: 15.49%
Qtrly Earnings Growth (yoy): 73.50%
Trailing Annual Dividend Yield: 3.00%
PEGulator: 0.68

And, in the last six months, insiders have purchased 18,000 shares.

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Member Avatar angus118 (< 20) Submitted: 10/27/2008 9:58:46 AM : Outperform Start Price: $58.87 PSA Score: +75.41

LN Nov 08 pick

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Member Avatar lowellfield (95.59) Submitted: 6/30/2008 12:40:18 PM : Underperform Start Price: $65.72 PSA Score: -117.36

Macro downturn will make people move less, lowering demands for storage. This may already be reflected in their slowing growth and declining margins.

Also not crazy about the preferred-intensive capital structure, and a little suspicious that management is greedier than most (As Citi analyst pointed out on 1Q08 call, they paid themselves $25m for flipping half of the Shurgard acquisition they just made in 2006. That deal must have created lots of shareholder value, huh?)

Plus there's a major premium to competitors, due probably to the fact that their balance sheet looks pretty clean unless you consider the 7% yielding preferred to be kinda debt-ish.

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Member Avatar meachamizer (< 20) Submitted: 6/17/2008 3:36:28 PM : Outperform Start Price: $67.24 PSA Score: +118.75

PSA had nearly 900,000 trades on Monday, that's an incredible number. The stock has been steadily dropping for months, but that amount of trades suggests that those who are just now selling are getting a lot of takers -- hoping to profit on a down stock as it starts its upswing again very soon. Indeed, public storage is usually a good performer during down times given the rise in foreclosures and the need for some place --at a mere $50 or so per month -- to store their belongings.

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Member Avatar squidboy1 (< 20) Submitted: 4/24/2008 1:29:11 PM : Outperform Start Price: $77.50 PSA Score: +85.84

The technicals on the stock are extremely good. And as people are displaced from there homes due to the housing crisis there will be an increased need for storage space. Because the displacement will result in downsizing but people are unwilling to part with there junk.

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