Great Ajax’s common shares will need to reach $6 to achieve average annual stock market performance of 9.0% over the next 6 years. To achieve Upper quartile performance, Great Ajax’s stock price will need to reach $7 by 2029. At the current price of $4, what is the market’s view of Great Ajax’s future operating performance?
Executive Summary
- Price Target Research identifies Great Ajax as having: high financial strength, stability, very low expected growth, and very low profitability. A big positive influence on Great Ajax’s valuation is its superior Risk Profile.
- Low valuation, lagging shareholder returns. Current valuation levels are below average relative to the Great Ajax Peer Group. Recent market returns have substantially underperformed the Great Ajax Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Great Ajax shares should reach a level of $10 by 2029 — an 25.7% per year total shareholder return. A 2029 stock price of $6 would reflect median performance and a price of $7 would be required to reach upper quartile performance.
- Great Ajax’s achieved growth is average. Historical growth has been average relative to the Great Ajax Peer Group and forecasted growth is relatively very low. Revenue Growth, EPS Growth, Equity Growth, and Asset Growth have all lagged. These factors have negatively affected market perceptions of Great Ajax. Great Ajax’s historical income statement growth has been lower than balance sheet growth. Revenue growth has fallen short of asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity.
- Asset Turnover, Pretax ROA, Pretax Margin, and Return on Equity are all group lagging. These factors have negatively affected market perceptions of Great Ajax. The company has normal cash needs.
- Risk Profile has been Great Ajax’s biggest valuation strength. Great Ajax’s risk profile is favorable. Overall variability has been very high with very high revenue variability, very low E.P.S. variability, and very high stock price volatility. Financial Strength is relatively very high and earnings’ expectations are below average. The debt/capital ratio has been relatively steady.
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