If you don’t like those scary articles in which big bank analysts with total job security predict dire things for your industry, or at least a part of it, don’t read AlphaVille’s take on Nomura’s bean counter Mike Prew. He’s just warned that if you want to know what REITs are really worth, you need to look at the cash flow.
The cash flow accounts are often neglected in REIT analysis which is surprising. It’s a better measure of a business’s profits than earnings because a company can show positive profits and earnings, and still not be able to pay its capital servicing requirements. It’s cash flow that pays the bills (Enron went bankrupt in 2001 with 2Q ‘profits’ of $1bn but cash flow negative by $1bn).