Is CubeSmart Now an Opportunity After a 13.6% Share Price Slide?

• If you are wondering whether CubeSmart is quietly turning into a value opportunity while the market looks the other way, this breakdown will help you consider whether the current price really makes sense.
• The stock has drifted lower this year, with the share price at $35.95, down 13.6% year to date and 11.4% over the last 12 months, although it remains up 31.5% over five years.
• Recently, investors have been weighing the outlook for storage demand and interest rates, which has kept sentiment on self storage REITs like CubeSmart somewhat cautious. At the same time, ongoing portfolio optimization and steady occupancy trends have reminded the market that this is a long term cash flow story rather than a short term rate trade.
• Despite the muted share price, CubeSmart currently scores a strong 6/6 on our valuation checks, suggesting the market may be underpricing its fundamentals. Next, we will walk through the main valuation approaches, before finishing with an intuitive way to think about what the stock may really be worth.

Find out why CubeSmart's -11.4% return over the last year is lagging behind its peers.

Approach 1: CubeSmart Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model projects CubeSmart’s adjusted funds from operations into the future and then discounts those cash flows back to today, aiming to estimate what the business is worth right now in $.

CubeSmart currently generates around $600.8 Million in free cash flow, and analysts expect this to rise gradually as the portfolio grows. Based on the latest projections, free cash flow is modeled to reach about $836.7 Million by 2035, with near term estimates from multiple analysts and longer term figures extrapolated by Simply Wall St using a 2 stage Free Cash Flow to Equity approach. Each of these future cash flows is discounted back to today to reflect risk and the time value of money.

Bringing all of those discounted cash flows together produces an estimated intrinsic value of about $57.66 per share, versus the current share price of $35.95. That implies roughly a 37.7% discount, which suggests the market may be overly cautious on CubeSmart’s long term cash generation.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests CubeSmart is undervalued by 37.7%. Track this in your watchlist or portfolio, or discover 917 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for CubeSmart.

Approach 2: CubeSmart Price vs Earnings

For a profitable REIT like CubeSmart, the price to earnings ratio is a useful shorthand for how much investors are willing to pay today for each dollar of current earnings. It reflects not just what the business is earning now, but also the growth investors expect and the risks they see ahead.

Higher growth and lower perceived risk usually justify a higher, or more generous, PE multiple, while slower growth or higher uncertainty tend to compress what the market is willing to pay. CubeSmart currently trades on a PE of about 23.0x, which is above the Specialized REITs industry average of roughly 16.5x, but below the peer group average of around 33.2x.

Simply Wall St’s Fair Ratio framework goes a step further than these simple comparisons. It estimates what a reasonable PE should be, given CubeSmart’s earnings growth outlook, margins, risk profile, industry and market cap, producing a Fair Ratio of about 31.1x. Because this incorporates company specific fundamentals rather than just copying what peers trade at, it can give a more nuanced anchor for valuation. Against that 31.1x Fair Ratio, CubeSmart’s current 23.0x multiple suggests the shares are trading at a discount to what its fundamentals might justify.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1462 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your CubeSmart Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of CubeSmart’s future with a concrete financial forecast and Fair Value estimate, all within the Community page on Simply Wall St that millions of investors use. A Narrative is your story behind the numbers, where you set assumptions for revenue growth, margins and future earnings, and the platform turns that story into projected cash flows, an intrinsic value, and a clear comparison against today’s share price to help you decide whether to buy, hold or sell. Because Narratives update automatically when new information such as earnings, news or guidance revisions arrives, they stay aligned with reality rather than a static spreadsheet. For CubeSmart, one investor might build a bullish Narrative around resilient New York City demand, slowing new supply and stronger margins that supports a Fair Value well above the current price, while another, more cautious investor might focus on softer Sunbelt trends, slower revenue growth and a slightly lower target multiple to arrive at a Fair Value closer to the low 40s.

Do you think there's more to the story for CubeSmart? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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