Momentum Building In American Realty Capital Properties Inc (ARCP)

On a per share basis, AFFO was $0.90 in 2014, giving American Realty Capital Properties Inc a trailing P/AFFO of only 9.7 at its current trading price even after the 2% bump from the Corvex news. Although not exactly an apples-to-apples comparison, REITs in general trade at an average P/FFO of about 17 according to Lazard. Thus, American Realty Capital Properties Inc could have significant upside if it traded nearer to that 17 number or even below it at 12 or 15. Further, the company will announce whether it will reinstate its dividend on its common stock in August along with its second quarter results. The announcement could be a catalyst for American Realty Capital Properties Inc to trade higher and for investors to collect income on par with American Realty Capital Properties Inc’s preferred investors, who currently collect a yield of about 7% on their shares.

American Realty Capital Properties Inc (NASDAQ:ARCP) trades at about 1x its tangible book value, while many other REITs trade at multiples ranging from 1.5x to 4.5x according to a list of comparable companies on S&P Capital IQ. American Realty Capital Properties Inc is also in a good position in terms of liquidity with current and quick ratios of 5 and 4.2, respectively. The company has also generated cash flow from operations in excess of its current liabilities on a magnitude of 3.5 times. American Realty Capital Properties Inc seems like a company poised to break out and could be propelled higher with the reinstatement of its dividend and its stock reaching a fuller valuation compared to other REITs. Thus, it seems like a good idea to follow Corvex and other funds into American Realty Capital Properties Inc.

Disclosure: None