"Buyer beware on this one "
It seems that two words in that sentence need to be considered ... "Buyer" and "beware"
Would one want to be a Buyer of this stock bearing in mind what its current financials show, and maybe it's a good idea to beware of hoping for a future upturn in this stock.
This company is supposed to have "Properties (which) are good and generate good cash flows". But considering the various costs that ARCP has to contend with, is that good enough ?
Looking at their latest Annual Income Statement, if one considers the costs/expenses between Gross Profit and Pretax Income there's an amount of approximately -$1.9billion. That's already far in excess of its "only source" of Revenue, which, if I'm not mistaken, is income from its properties.
So just to break even at Pretax Income it seems that ARCP has to more than double the revenue from its properties.
If we add the other cost "millstone", which Spekulatius referred to, namely the company's debt burden, then we have to add another -$0.45billion to Revenue to work towards breaking even at its Bottom line ... and that's without the company, as yet, paying any tax.
American Realty Capital Properties, Inc. (ARCP) -NasdaqGS
8.41  0.12(1.39%) Jul 10, 4:00PM EDT
After Hours : 8.41 0.00 (0.00%) Jul 10, 5:24PM EDT
| Income Statement | Get Income Statement for: |
| Dec 31, 2014Dec 31, 2013Dec 31, 2012| Period Ending | | Total Revenue | 1,579,257 | 329,323 | 67,207 | | Cost of Revenue | 203,969 | 23,616 | 3,522 | | | Gross Profit | 1,375,288 | 305,707 | 63,685 | | | Operating Expenses | | Research Development | - | - | - | | Selling General and Administrative | 188,629 | 140,634 | 5,670 | | Non Recurring | 649,336 | 290,002 | 47,673 | | Others | 916,003 | 210,976 | 40,957 | | | | Total Operating Expenses | - | - | - | | | | Operating Income or Loss | (378,680) | (335,905) | (30,615) | | | Income from Continuing Operations | | Total Other Income/Expenses Net | (179,584) | (66,328) | 979 | | Earnings Before Interest And Taxes | (558,264) | (402,233) | (29,636) | | Interest Expense | 452,648 | 105,548 | 11,856 | | Income Before Tax | (1,010,912) | (507,781) | (41,492) | | Income Tax Expense | - | - | - | | Minority Interest | 33,727 | 16,316 | 585 | | | | Net Income From Continuing Ops | (1,010,912) | (507,781) | (41,492) | | | Non-recurring Events | | Discontinued Operations | - | (34) | (745) | | Extraordinary Items | - | - | - | | Effect Of Accounting Changes | - | - | - | | Other Items | - | - | - | | | | Net Income | (977,185) | (491,499) | (41,652) |
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If the company should sell some of the Assets, contained within the $15billion on its Balance Sheet, and use that to pay off debt, does that solve its problems overall ?
It may still not have enough Revenue earning capability to exceed its ongoing costs/expenses based on what one sees so far.
One has to wonder how new management can change that possible reality.
True 'Value Investors' are often looking for that share price which falls below "value of company per share", and may see ARCP falling in that category.
So, at the end of the day, for a stock like ARCP it's probably all about the regular dividend. Many of its "compatriots" such as STAG and SRC are in much the same boat. And to continue paying that dividend they continue to report losses.
One wonders if a company in a similar business, such as Reality Income Corporation (O), may not be a better investment bet. They also pay a regular dividend. According to Yahoo Finance, O's Trailing Annual Dividend Yield is 4.9% compared to ARCP's at 5%. So nothing in it.
But at least with O you are getting a company that reports regular Bottom Line profits from its Property Portfolio and its chart also looks a lot more attractive and in line with its business performance ....
Realty Income Corporation (O) -NYSE
46.36 0.41(0.89%) Jul 10, 4:04PM EDT
After Hours : 46.36 0.00 (0.00%) Jul 10, 4:25PM EDT
| Income Statement | Get Income Statement for: |
| Dec 31, 2014Dec 31, 2013Dec 31, 2012| Period Ending | | Total Revenue | 933,505 | 780,209 | 484,581 | | Cost of Revenue | 53,871 | 38,851 | 21,306 | | | Gross Profit | 879,634 | 741,358 | 463,275 | | | Operating Expenses | | Research Development | - | - | - | | Selling General and Administrative | 51,085 | 56,881 | 38,123 | | Non Recurring | 4,126 | 13,303 | 11,538 | | Others | 374,661 | 306,769 | 147,515 | | | | Total Operating Expenses | - | - | - | | | | Operating Income or Loss | 666,128 | 545,847 | 389,242 | | | Income from Continuing Operations | | Total Other Income/Expenses Net | 39,205 | - | - | | Earnings Before Interest And Taxes | 666,128 | 545,847 | 389,242 | | Interest Expense | 216,366 | 181,442 | 123,143 | | Income Before Tax | 449,762 | 364,405 | 266,099 | | Income Tax Expense | 3,461 | 2,350 | 1,061 | | Minority Interest | (1,305) | (719) | - | | | | Net Income From Continuing Ops | 267,835 | 179,894 | 141,895 | | | Non-recurring Events | | Discontinued Operations | 2,800 | 65,670 | 17,257 | | Extraordinary Items | - | - | - | | Effect Of Accounting Changes | - | - | - | | Other Items | - | - | - | | | | Net Income | 270,635 | 245,564 | 159,152 | | Preferred Stock And Other Adjustments | (43,077) | (41,930) | (44,614) | | | Net Income Applicable To Common Shares | 227,558 | 203,634 | 114,538 |
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