Real estate investment trust (REIT) VICI Properties Inc. (VICI) in Las Vegas owns one of the largest portfolios of market-leading gaming, hospitality, and entertainment destinations, including the world-renowned Caesars Palace. The company’s national, geographically diverse portfolio consists of 28 gaming facilities that comprise more than 62 million square feet and features approximately 25,000 hotel rooms and more than 250 restaurants, bars, nightclubs, and sportsbooks.

REITs are known to provide natural protection against inflation because real estate rents and values tend to increase in tandem with general prices. Furthermore, many leases are tied to inflation, thus, supporting REIT’s dividend growth and providing a reliable income stream even during inflationary periods. With the Consumer Price Index rising 8.5% in March, representing the most heated inflation since December 1981, investors have been looking for safe-haven bets, which has helped VICI’s shares to gain 6.3% in price over the past month.

However, the stock has slumped 3.6% over the past six months and 4.3% year-to-date to close yesterday’s trading session at $28.83.

Here is what could shape VICI’s performance in the near term:

Bottom Line Declined in its Last Reported Quarter

For its fiscal fourth quarter, ended Dec. 31, 2021, VICI’s total revenues increased 2.7% year-over-year to $383.15 million. However, its net income declined 2.3% from its year-ago value to $283.80 million, while its net income per share decreased 17% year-over-year to $0.44. Its FFO and FFO per share came in at $281.48 million and $0.44, respectively, compared to $288.01 million and $0.53 in the prior-year quarter. Its AFFO was $278.88 million, up 10.8% from the prior-year quarter. But its AFFO per share declined 4.3% year-over-year to $0.44.

Mixed Expectations

Analysts expect 13.3% year-over-year growth in the company’s revenue  in the quarter ending March 31, 2022, and 30.6% in the current quarter, ending June 30, 2022. Also, VICI’s revenues are expected to increase 50.2% year-over-year to $2.27 billion in the current year. However, the Street expects the company’s EPS to come in at $0.42 in the about to be reported quarter, ending March 31, 2022, indicating a 16% decline from its year-ago value. Also, its EPS is expected to decrease 7.4% in the current  quarter but increase 12.5% in the current year.

Mixed Valuation

In terms of trailing-12-month Price/Sales, VICI is currently trading at 10.57x, which is 60.5% higher than the 6.58x industry average. Also, its 23.60 trailing-12-month Price/Cash Flow ratio  is 38.2% higher than the 17.08 industry average.

However, VICI’s trailing-12-month P/FFO is 9.5% lower than the 17.13x industry average, and its P/AFFO is 19.5% lower than the 19.28x industry average.

POWR Ratings Reflect Uncertainty

VICI has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of C for Value, which is consistent with its mixed valuation.

VICI also has a C grade for Stability, in sync with its beta of 1.13.

Of the 19 stocks in the REITs – Hotel industry, VICI is ranked #4.

Beyond what I have stated above, one can also view VICI’s grades for Quality, Growth, Momentum, and Sentiment here.

View the top-rated stocks in the REITs – Hotel industry here.

Bottom Line

VICI has been surging in price of late  due to renewed investor attention amid rising inflation. However, its EPS declined in its last reported quarter, and analysts expect a further decline in the about to be reported quarters. Furthermore, its payout ratio is 78.4%, which questions the sustainability of its dividend payment as it consumes the majority of the company’s earnings. Thus, I think it could be wise to wait for an improvement in VICI’s bottom line before investing in the stock.

How Does VICI Properties Inc. (VICI) Stack Up Against its Peers?

While VICI has an overall POWR Rating of C, one might want to consider looking at its industry peer, Megaworld Corporation (MGAWY), which has a B (Buy) rating.

VICI shares rose $0.10 (+0.35%) in premarket trading Thursday. Year-to-date, VICI has declined -2.99%, versus a -6.37% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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