It seems like more than ever, people are becoming pack rats. Attics, basements, and garages are filling up. That's where self-storage companies such as Extra Space Storage (NYSE:EXR), Public Storage (NYSE:PSA), and CubeSmart (NYSE:CUBE) come in. And believe me, they are thriving like never before.
No more room
Extra Space Storage's latest revenue numbers surged 21% to $133 million while same-store sales rose nearly 8%. Adjusted funds from operations flew 21% to $0.52 per share.
CEO Spencer F. Kirk credited the success of his business to the macro picture, saying, "The self-storage industry finds itself in unprecedented times. New supply remains at historical lows, customer demand is stable, and the economy continues to recover."
As with most industries, when supply runs out, the next result is higher prices and higher profits. Every extra dollar Extra Space can charge is an extra dollar that will find its way to the bottom line and can potentially be paid out as a dividend.
For 2013, analysts expect Extra Space Storage to see revenue growth of 23% along with EPS growth of 24.5% to $1.98. In 2014, look for another 10% growth in sales along with EPS growth of 18.7% to $2.35 per share. Extra Space Storage may be a good value as this puts it at a forward P/E at just under 18, with consistently rapid growth on both the top and bottom lines.
No slouch either
Public Storage last reported third-quarter results on Oct. 31. Revenue jumped 7.3% while same-store sales leaped 5.5%. Funds from operations popped 15.6% to $2.00 per share. While these are solid numbers, the growth rate as a percentage is far slower here than at Extra Space Storage.
CEO Ronald L. Havner credited the industry for Public Storage's success. He stated, "The fundamentals are very good, there's really an absence of new supply in any meaningful degree, interest rates are low, financing's available, and the operating fundamentals of the business are quite good right now."
As Havner implies, little to no new supply in the storage industry is going to create a shortage. Often with other industries, lack of supply is made up for by increased production. Havner isn't seeing any serious expansion in the storage industry. This bodes quite well not just for Public Storage, but for all players in the industry.
For 2013, analysts expect Public Storage to grow revenue by 8.4% and EPS to grow 17.1% to $7.39 per share. In 2014, Public Storage is expected to grow sales another 7.1%, with EPS growth of 6.9% to $7.90 per share. Solid expectations, but again, far slower than Extra Space Storage.
Public Storage has a forward P/E of a hair over 19 with less growth than Extra Space Storage. It doesn't necessarily seem expensive, but Extra Space Storage may be the better bet.
Thinking outside of the cube
CubeSmart last reported third-quarter results on Nov. 7. Revenue hopped 19.4% while same-store sales spiked 7.2%. Adjusted funds from operations rocketed 43.8% to $35.1 million or $0.25 per share.
CEO Dean Jernigan sees "substantial revenue gains" over the next two years. He points out that occupancy is very high among all the publicly traded self-storage companies (such as Extra Space Storage and Public Storage), and he sees opportunity for all players to scale back discounting and promotions, which will drive increased rent revenue that falls straight to the bottom line.
For full-year 2013, analysts expect CubeSmart to grow revenue by 15.7% along with EPS to grow 21.6% to $0.90 per share. In 2014, CubeSmart is expected to grow sales another 8.4% along with EPS growth of 12.2% to $1.01 per share. This puts CubeSmart at a forward P/E of between 15 and 16, the cheapest of the three stocks on a P/E basis. While CubeSmart is expected to grow both sales and earnings faster than Public Storage, the growth rate is still a decent clip below that of Extra Space Storage.
Foolish final thoughts
While investing in storage units is not exactly the most exciting business, the sales, profits, dividends, and growth are exciting. In the end, investing is primarily a numbers game, and storage companies offer very solid fundamentals. Fools should take a closer look at Extra Space Storage. While its earnings are a bit more expensive based on analyst 2014 estimates when compared to CubeSmart, its current and expected growth more than make up for it.
Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.