SUN COMMUNITIES INC (NYSE:SUI) Presents a Compelling Value Investment Case

SUN COMMUNITIES INC (NYSE:SUI) has been found using a value investing screening method that focuses on stocks with good fundamental valuation scores while also having acceptable performance in profitability, financial health, and growth. This method, based on the ideas of value investing started by Benjamin Graham and later made widely known by Warren Buffett, aims to find companies trading for less than their intrinsic value. The aim is to find chances where the market might have missed a company’s actual value, offering a possible safety buffer for investors. SUN COMMUNITIES, a real estate investment trust that focuses on manufactured housing and recreational vehicle communities, seems to meet this standard according to its most recent fundamental data.

Valuation Metrics

SUN COMMUNITIES is notable with a valuation score of 7 out of 10, suggesting it could be trading at a good level compared to its fundamentals. Important valuation data supports this view:

• The company’s Price/Earnings (P/E) ratio of 12.71 is much lower than the industry average of 54.15 and the S&P 500 average of 27.30, indicating it is priced lower than wider market and sector comparisons.
• Its Enterprise Value to EBITDA and Price/Free Cash Flow ratios are both more positive than 95% of industry competitors, supporting the idea that the stock is priced cautiously.
• Even though the Forward P/E is higher at 38.48, it is still under the industry average, and good expected earnings growth could support this multiple in the future.

These valuation traits are important to value investing, as they help find differences between market price and intrinsic value, a main idea of the method.

Financial Health

With a health score of 7, SUN COMMUNITIES shows good financial stability, which is important for value investors looking for strong businesses that can handle economic changes. Key strengths are:

• A strong Current Ratio of 4.21 and Quick Ratio of 3.81, both at the highest level in its industry, showing good short-term liquidity and an ability to meet obligations without difficulty.
• A Debt-to-Equity ratio of 0.56, which is more favorable than all industry competitors, showing a careful method to leverage.
• While the Altman-Z score of 1.92 calls for some attention, it still does better than 90% of the industry and shows little near-term bankruptcy risk.

A good financial base lowers the risk for value-focused investors, matching the focus on safety and strength in the method.

Profitability Assessment

The company’s profitability score of 6 shows a varied but generally acceptable performance, significant for value investors who focus on lasting earnings power. Important points are:

• Return on Assets (9.69%) and Return on Equity (16.89%) are some of the best in the industry, showing effective use of capital.
• Profit margins are good compared to competitors, with a Profit Margin of 46.59% doing better than all industry rivals.
• However, margins have had some recent reduction, and gross margin is lower than 90% of the industry, showing areas where operational effectiveness might get better.

For value investors, steady profitability supports the idea of undervaluation, as it implies the market might be underestimating the company’s capacity to produce returns.

Growth Prospects

SUN COMMUNITIES has a growth score of 5, supported by a mix of good past trends and positive future estimates. Important growth measures include:

• Revenue has increased at an average rate of 20.57% over recent years, showing good operational expansion.
• Earnings Per Share (EPS) grew by 1089.53% in the last year, even though longer-term EPS growth has been negative, pointing to some instability.
• Analysts predict future EPS growth of 47.07% each year, which might make up for a small expected drop in revenue.

Growth is an important part of value investing, as it supports the expectation that intrinsic value will rise over time, possibly closing the difference with market price.

Conclusion

SUN COMMUNITIES INC offers a strong case for value investors, mixing good valuation multiples with good financial health, acceptable profitability, and positive growth forecasts. Its fundamentals indicate a company that might be undervalued by the market, especially given its good liquidity, low debt, and effective capital use. While there are areas that could be better, like margin steadiness and revenue sustainability, the overall picture fits well with a method focused on finding undervalued stocks with fundamental strength.

For investors wanting to look into similar chances, more screened results from this value-focused method are available here.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions.