On Wednesday, Scotiabank updated its outlook on Essential Properties Realty Trust (NYSE:EPRT), raising the price target to $28 from $26 while maintaining a Sector Perform rating. The adjustment follows the company's first-quarter results, which aligned with expectations. Essential Properties showcased its capability to carry out accretive deals, with a record first-quarter transaction volume of approximately $249 million at an 8.1% capitalization rate, a slight increase from the previous quarter.
The firm noted that despite fluctuations in the Net Lease transaction market, Essential Properties has continued to attract sale leaseback (SLB) financing. Analysts at Scotiabank anticipate the company will maintain its current investment pace through the year.
The report highlighted that Essential Properties' investments, which are expected to yield cap rates between the high-7% to 8%, along with substantial leverage capacity—3.6x pro forma for $184 million of unsettled equity forwards as reported by management—will contribute to a forecasted growth in adjusted funds from operations per share (AFFOPS) of 5.2% in 2024 and 7.3% in 2025.
These figures outpace the Net Lease subsector's projected AFFOPS growth of 2.7% and 3.3% for the same periods.
Scotiabank's analysis suggests that Essential Properties' premium valuation relative to its Net Lease peers is warranted. This valuation is attributed to the company's consistent AFFOPS growth, its ability to access acquisitions, and its proven track record in executing transactions.
InvestingPro Insights
With the latest update from Scotiabank on Essential Properties Realty Trust (NYSE:EPRT), investors may find additional context through real-time data and insights from InvestingPro. The company has demonstrated a strong financial position with a market capitalization of $4.64 billion and a robust revenue growth rate of 26.44% over the last twelve months as of Q1 2024. This growth is complemented by a significant gross profit margin of 98.75%, underlining the company's efficiency in generating earnings.
InvestingPro Tips highlight that Essential Properties has been consistent in rewarding shareholders, having raised its dividend for six consecutive years, reflecting a solid commitment to returning value. Additionally, analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's future performance. With the stock trading near its 52-week high and a dividend yield of 4.32%, Essential Properties appears to be an attractive option for income-seeking investors.
For those considering an in-depth analysis, InvestingPro offers additional tips on Essential Properties, providing a more comprehensive investment perspective. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and unlock the full potential of InvestingPro's insights.
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