Yahoo Finance Do You Know Hamborner REIT AG’s (ETR:HAB) Cash Situation?
Two important questions to ask before you buy Hamborner REIT AG (ETR:HAB) is, how it makes money and how it spends its cash. This difference directly flows down to how much the stock is worth. Operating in the diversified reits industry, HAB is currently valued at €747.8m. Today we will examine HAB’s ability to generate cash flows, as well as the level of capital expenditure it is expected to incur over the next couple of years, which will result in how much money goes to you.
See our latest analysis for Hamborner REIT
Is Hamborner REIT generating enough cash?
Hamborner REIT generates cash through its day-to-day business, which needs to be reinvested into the company in order for it to continue operating. What remains after this expenditure, is known as its free cash flow, or FCF, for short.
There are two methods I will use to evaluate the quality of Hamborner REIT’s FCF: firstly, I will measure its FCF yield relative to the market index yield; secondly, I will examine whether its operating cash flow will continue to grow into the future, which will give us a sense of sustainability.
Free Cash Flow = Operating Cash Flows – Net Capital Expenditure
Free Cash Flow Yield = Free Cash Flow / Enterprise Value
where Enterprise Value = Market Capitalisation + Net Debt
Hamborner REIT’s yield of 3.49% indicates its sub-standard capacity to generate cash, compared to the stock market index as a whole, accounting for the size differential. This means investors are taking on more concentrated risk on Hamborner REIT but are not being adequately rewarded for doing so.
Does Hamborner REIT have a favourable cash flow trend?
Does HAB’s future look brighter in terms of its ability to generate higher operating cash flows? This can be estimated by examining the trend of the company’s operating cash flow moving forward. In the next few years, HAB is expected to deliver a decline in operating cash flow compared to the most recent level of €62.9m, which is not an encouraging sign. However, breaking down growth into a year on year basis, HAB ‘s negative growth rate improves each year, from -7.8% next year, to 8.2% in the following year.
Next Steps:
Low free cash flow yield means you are not currently well-compensated for the risk you’re taking on by holding onto Hamborner REIT relative to a well-diversified market index. Moreover, the stock’s negative growth prospects in terms of cash flow, seems worrisome. Now you know to keep cash flows in mind, I recommend you continue to research Hamborner REIT to get a more holistic view of the company by looking at:
Valuation: What is HAB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether HAB is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Hamborner REIT’s board and the CEO’s back ground.
Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
