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Equinix Is Trading above the Industry Average

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Jan. 23 2018, Updated 7:31 a.m. ET

Peer group price-to-FFO multiple

REITs are valued using price-to-FFO multiples, as this ratio makes multiple adjustments that help these REITs correctly determine their income. Equinix’s 3Q17 funds from operations stood at $4.97 per share. Its expected FFO was $4.11 for a surprise of ~20.9%.

EQIX has a price-to-FFO multiple of 17.1x. The peer group median is 14.3x while the peer group’s average is 15.0x, indicating that EQIX is trading at a premium. Its peer group consists of Digital Realty Trust (DLR), CoreSite Realty (COR), and Cyrus One (CONE).

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Peer group’s EV-to-EBITDA multiples

EQIX has an EV-to-EBITDA[1. enterprise value to earnings before interest, tax, depreciation, and amortization] multiple of 17.4x. which is higher than the peer group’s median and average of 15.7x and 15.8x, respectively. 

Compared to its peer group, Equinix has a higher ratio supporting the price-to-FFO multiple and is trading at a premium valuation.

Peer group’s earnings per share

Equinix (EQIX) has TTM (trailing-12-months) earnings per share (or EPS) of $3.05. Among its peers, Digital Realty Trust (DLR) reported earnings per share of $1.24, CoreSite Realty (COR) reported EPS of $1.84, and Cyrus One (CONE) reported EPS of -$0.97. 

Equinix comprises ~4.2% of the iShares Core US REIT ETF (USRT). It has a large portfolio and covers a variety of industries including healthcare, self-storage, and data centers.

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