ACC - Embedded Expectations Analysis - 2020 09 08
American Campus Communities, Inc. (ACC:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 50.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about liquidity, leasing activity, and the financial position of residentsSpecifically, management may lack confidence in their ability to reduce their debt-to-assets ratio, create liquidity, and fund remaining capital development needs. In addition, they may have concerns about the sustainability of leasing activity in their open market properties, leasing activity near universities with a predominantly online curriculum, and universities conducting in-person classes. Moreover, management may be exaggerating optimism for the upcoming academic year, the potential of student renters' financial position and buying power to improve, and how well positioned their long-term investments are. Finally, management may have concerns about residents' ability to continue paying rent, the effectiveness of financial relief programs, and lack of summer camp business
American Campus Communities is a real estate investment trust focusing on the acquisition, design, financing, development, construction management, leasing, and management of student housing properties. The company has four reportable segments: Owned Properties, which includes off-campus properties that are located in close proximity to the school campus; On-Campus Participating Properties, which includes on-campus properties that are operated under long-term ground/facility leases; Development Services, which consists of development and construction management services; and Property Management Services, which includes third-party management contracts in which the company is responsible for operations.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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