Tejon Ranch Co. (TRC) Bundle
Understanding Tejon Ranch Co. (TRC) Revenue Streams
Understanding Tejon Ranch Co.’s Revenue Streams
Tejon Ranch Co. generates revenue through multiple segments, primarily ranch operations, mineral resources, and farming. The breakdown of these revenue sources provides insights into the company’s financial health.
Revenue Breakdown by Segment
| Segment | Q3 2024 Revenue ($ in thousands) | Q3 2023 Revenue ($ in thousands) | Year-over-Year Change ($ in thousands) | Year-over-Year Change (%) |
|---|---|---|---|---|
| Ranch Operations | 1,446 | 1,052 | 394 | 37% |
| Mineral Resources | 7,687 | 11,630 | (3,943) | (34%) |
| Farming | 3,242 | 2,642 | 600 | 23% |
| Commercial/Industrial | 8,497 | 8,706 | (209) | (2%) |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the total revenue across segments showed mixed results:
- Total Ranch Operations revenues increased by $134,000, or 4%, from $3,384,000 in 2023 to $3,518,000 in 2024.
- Mineral resources revenues decreased by $3,943,000, or 34%, from $11,630,000 in 2023 to $7,687,000 in 2024.
- Farming revenues decreased by $603,000, or 12%, from $4,852,000 in 2023 to $4,249,000 in 2024.
- Commercial/industrial revenues decreased by $209,000, or 2%, from $8,706,000 in 2023 to $8,497,000 in 2024.
Contribution of Business Segments to Overall Revenue
In the first nine months of 2024, the contributions from each segment were:
- Ranch Operations: $3,518,000
- Mineral Resources: $7,687,000
- Farming: $4,249,000
- Commercial/Industrial: $8,497,000
Significant Changes in Revenue Streams
The most notable change was in the mineral resources segment, where revenues decreased significantly due to a $3,355,000 drop in water sales revenue, attributed to higher-than-average rainfall limiting sales opportunities. In contrast, ranch operations benefitted from a $394,000 increase in revenues driven by higher grazing lease revenues.
Farming operations experienced a revenue increase in almonds, with sales rising to $1,503,000 for Q3 2024 from $581,000 in Q3 2023, marking a 159% increase.
Overall, while some segments showed growth, the mineral resources and farming segments faced challenges, particularly in water sales and crop yields, impacting overall revenue stability.
| Segment | 2024 Revenue ($ in thousands) | 2023 Revenue ($ in thousands) | Change ($ in thousands) | Change (%) |
|---|---|---|---|---|
| Ranch Operations | 3,518 | 3,384 | 134 | 4% |
| Mineral Resources | 7,687 | 11,630 | (3,943) | (34%) |
| Farming | 4,249 | 4,852 | (603) | (12%) |
| Commercial/Industrial | 8,497 | 8,706 | (209) | (2%) |
A Deep Dive into Tejon Ranch Co. (TRC) Profitability
A Deep Dive into Tejon Ranch Co.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the total revenues were $10,856,000 compared to $10,209,000 for the same period in 2023, reflecting an increase of 6.35%. The total expenses for the same period were $14,648,000, leading to an operating loss of ($3,792,000).
Operating Profit Margin: The operating income for the nine months ended September 30, 2024, was ($11,324,000) compared to ($1,347,000) for the same period in 2023. This reflects a significant decline in profitability.
Net Profit Margin: The net loss attributable to common stockholders for the three months ended September 30, 2024, was ($1,836,000), compared to ($341,000) for the same period in 2023. The net loss for the nine months ended September 30, 2024, was ($1,793,000) compared to a net income of $1,700,000 for the same period in 2023.
Trends in Profitability Over Time
The trend in profitability shows a decline in net income and operating income over the past year. The total revenues increased by 4% for the first nine months of 2024 compared to the same period in 2023, but the operating loss increased substantially.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenues | $10,856,000 | $10,209,000 | 6.35% |
| Total Expenses | $14,648,000 | $10,172,000 | 44.84% |
| Operating (Loss) Income | ($3,792,000) | $37,000 | N/A |
| Net (Loss) Income | ($1,836,000) | ($341,000) | 438.77% |
Comparison of Profitability Ratios with Industry Averages
Comparing the profitability ratios with industry averages, the net profit margin is significantly lower than the industry standard of approximately 10%. The gross profit margin has also been adversely affected by rising operational costs.
Analysis of Operational Efficiency
Cost management remains a challenge with total expenses rising to $14,648,000 in Q3 2024, up from $10,172,000 in Q3 2023, marking an increase of 44.84%. This is primarily due to increased costs in the farming segment, which reported total expenses of $6,252,000 for Q3 2024, compared to $2,157,000 in Q3 2023.
| Segment | Q3 2024 Expenses | Q3 2023 Expenses | Change (%) |
|---|---|---|---|
| Farming | $6,252,000 | $2,157,000 | 190.30% |
| Mineral Resources | $1,812,000 | $2,000,000 | –9.40% |
| Ranch Operations | $1,223,000 | $1,196,000 | 2.26% |
Debt vs. Equity: How Tejon Ranch Co. (TRC) Finances Its Growth
Debt vs. Equity: How Tejon Ranch Co. Finances Its Growth
As of September 30, 2024, Tejon Ranch Co. reported total capitalization at book value of $543,625,000, which includes $59,942,000 in debt and $483,683,000 in equity. This results in a debt-to-total-capitalization ratio of approximately 11.0%.
Overview of the Company's Debt Levels
Tejon Ranch Co. has a structured approach to managing its debt, which includes both long-term and short-term components. The current long-term debt primarily consists of a revolving credit line of $160,000,000 and a letter of credit sub-facility of $15,000,000. The company has utilized $12,000,000 from its credit line for ongoing projects.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio stands at approximately 0.12 (calculated as $59,942,000 debt / $483,683,000 equity), indicating a relatively conservative leverage position compared to industry standards, where average ratios often range from 0.5 to 1.5 depending on the sector.
Recent Debt Issuances and Credit Ratings
In November 2023, Tejon Ranch Co. entered into a Credit Agreement with AgWest Farm Credit, which facilitated the refinancing of existing debts, including a payoff of approximately $47,078,564 to Bank of America. As of September 30, 2024, the company’s outstanding balance on joint venture loans included $52,984,000 and $61,144,000 for TRC-MRC 5 LLC and TRC-MRC 4 LLC, respectively.
Balancing Debt Financing and Equity Funding
Tejon Ranch Co. actively balances its financing through both debt and equity options. The company reported cash, cash equivalents, and marketable securities totaling approximately $41,261,000 as of September 30, 2024. This represents a decrease of $23,202,000 from December 31, 2023. The company has historically funded operations through cash flows, short-term borrowings, and equity issuance when necessary.
| Debt Type | Amount ($) | Maturity Date |
|---|---|---|
| Revolving Credit Line | 160,000,000 | January 1, 2029 |
| Letter of Credit Sub-Facility | 15,000,000 | — |
| Bank of America Term Note | 47,078,564 | — |
| TRC-MRC 5 LLC Loan | 52,984,000 | February 3, 2035 |
| TRC-MRC 4 LLC Loan | 61,144,000 | March 1, 2033 |
Assessing Tejon Ranch Co. (TRC) Liquidity
Assessing Liquidity and Solvency
Liquidity is a critical aspect of financial health, reflecting a company’s ability to meet its short-term obligations. For Tejon Ranch Co. (TRC), we can analyze liquidity through current and quick ratios, working capital trends, and cash flow statements.
Current and Quick Ratios
The current ratio is calculated as current assets divided by current liabilities. For TRC, as of September 30, 2024, the current assets amounted to approximately $58,681,000, and current liabilities were $22,775,000. This results in a current ratio of:
Current Ratio = $58,681,000 / $22,775,000 = 2.57
The quick ratio, which excludes inventory from current assets, is calculated as:
Quick Ratio = (Current Assets - Inventories) / Current Liabilities
Assuming inventories are $5,000,000, the quick ratio would be:
Quick Ratio = ($58,681,000 - $5,000,000) / $22,775,000 = 2.36
Analysis of Working Capital Trends
Working capital is defined as current assets minus current liabilities. As of September 30, 2024:
Working Capital = Current Assets - Current Liabilities = $58,681,000 - $22,775,000 = $35,906,000
This represents a strong working capital position, indicating that TRC has sufficient short-term assets to cover its short-term liabilities.
Cash Flow Statements Overview
TRC's cash flow activities for the nine months ended September 30, 2024, reveal the following:
| Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $1,045 | $14,750 |
| Investing Activities | $(17,377) | $(6,805) |
| Financing Activities | $11,794 | $(3,915) |
In 2024, cash provided by operating activities was significantly lower than in 2023, primarily due to a decrease in cash generated from joint ventures. Investing activities consumed a substantial amount of cash, largely due to construction expenditures. However, financing activities provided a positive cash flow, indicating reliance on debt financing to support operations.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, TRC held approximately $41,261,000 in cash and marketable securities, a decrease from $64,463,000 at the end of 2023. This decrease raises potential liquidity concerns, particularly in light of the significant cash outflows in investing activities. However, the company maintains a strong liquidity position with access to a revolving line of credit of $59,942,000.
In summary, while TRC demonstrates strong liquidity ratios and working capital, its cash flow trends indicate a need for careful management of cash resources to sustain operations and meet future obligations.
Is Tejon Ranch Co. (TRC) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios, stock performance, and analyst opinions.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial indicator of how much investors are willing to pay per dollar of earnings. As of September 30, 2024, the company reported a net loss attributable to common stockholders of $1,794,000, resulting in a basic net loss per share of $(0.07) . Given that the current stock price is approximately $8.00, the P/E ratio is not applicable as the company is not profitable.
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. The book value per share as of September 30, 2024, is calculated as follows:
- Total Equity: $468,320,000
- Shares Outstanding: 26,814,680
- Book Value per Share: $17.43 (calculated as $468,320,000 / 26,814,680)
With a current stock price of $8.00, the P/B ratio is approximately 0.46, indicating potential undervaluation relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another important valuation metric. As of September 30, 2024, the EBITDA for the last twelve months is $3,137,000 . The enterprise value (EV) is calculated as:
- Market Capitalization: $214,517,440 (calculated as $8.00 26,814,680)
- Total Debt: $222,746,000
- Cash and Cash Equivalents: $27,369,000
- Enterprise Value: $409,894,440 (calculated as Market Capitalization + Total Debt - Cash)
The EV/EBITDA ratio is approximately 130.5, suggesting high valuation relative to earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated. Below is a summary of its performance:
| Month | Stock Price ($) |
|---|---|
| September 2023 | 9.50 |
| December 2023 | 8.75 |
| March 2024 | 7.50 |
| June 2024 | 8.00 |
| September 2024 | 8.00 |
Dividend Yield and Payout Ratios
The company does not currently pay dividends, resulting in a dividend yield of 0% . The lack of dividend payments reflects a focus on reinvestment rather than returning cash to shareholders.
Analyst Consensus on Stock Valuation
Analyst ratings on the stock vary, with consensus leaning towards a Hold position. The following is a summary of recent analyst ratings:
| Analyst | Rating | Price Target ($) |
|---|---|---|
| Analyst A | Hold | 8.50 |
| Analyst B | Hold | 7.75 |
| Analyst C | Hold | 8.00 |
In summary, the valuation analysis indicates that the company is currently undervalued based on its P/B ratio but is facing high EV/EBITDA ratios, suggesting market skepticism regarding its future earnings potential.
Key Risks Facing Tejon Ranch Co. (TRC)
Key Risks Facing Tejon Ranch Co. (TRC)
Tejon Ranch Co. operates in a multifaceted environment with various internal and external risks impacting its financial health. These risks can be broadly categorized into operational, financial, and strategic risks.
Industry Competition
The company faces significant competition in the real estate and agricultural sectors. The competitive landscape includes various developers and agricultural producers, which can pressure pricing and margins.
Regulatory Changes
Changes in regulations at both state and federal levels significantly impact operations, especially in the areas of land use and environmental compliance. For instance, ongoing discussions about groundwater management in California could impose restrictions on water usage, affecting agricultural yield and operational costs.
Market Conditions
Market volatility poses a risk, particularly in real estate development and agriculture. Economic downturns can result in reduced demand for residential and commercial properties, while agricultural products are subject to price fluctuations based on market supply and demand dynamics.
Operational Risks
Operational risks stem from the company's farming activities, which are highly seasonal and dependent on weather conditions. For the nine months ended September 30, 2024, the company reported:
| Farming Segment | Revenue ($ in thousands) | Expenses ($ in thousands) | Operating Loss ($ in thousands) |
|---|---|---|---|
| 2024 | $4,249 | $9,406 | $(5,157) |
| 2023 | $4,852 | $5,644 | $(792) |
This illustrates a significant increase in operational losses, primarily due to adverse weather impacting crop yields, particularly in pistachios and wine grapes.
Financial Risks
Financial risks include liquidity challenges and the impact of debt levels on operations. As of September 30, 2024, the total capitalization at book value was:
| Debt ($ in thousands) | Equity ($ in thousands) | Debt-to-Total-Capitalization Ratio |
|---|---|---|
| $59,942 | $483,683 | 11.0% |
This low debt-to-capitalization ratio indicates a conservative financial structure; however, the company must manage cash flows effectively to meet operational needs.
Cash Flow and Liquidity
The company reported cash and cash equivalents of approximately $27,369,000 as of September 30, 2024, a decrease from $31,907,000 at the end of 2023. Additionally, cash flow activities for the nine months ended September 30, 2024, were:
| Cash Flow Activity | 2024 ($ in thousands) | 2023 ($ in thousands) |
|---|---|---|
| Operating Activities | $1,045 | $14,750 |
| Investing Activities | $(17,377) | $(6,805) |
| Financing Activities | $11,794 | $(3,915) |
These figures highlight a dramatic decline in cash generated from operations, indicating potential liquidity risks going forward.
Mitigation Strategies
To counter these risks, the company has implemented several strategies, including diversifying its revenue streams across real estate, agriculture, and mineral resources. Additionally, ongoing investments in infrastructure projects are aimed at stabilizing cash flows and enhancing operational efficiencies.
Overall, while Tejon Ranch Co. faces multiple risk factors that could affect its financial performance, the management's proactive approach in addressing these challenges is crucial for sustaining growth and profitability.
Future Growth Prospects for Tejon Ranch Co. (TRC)
Future Growth Prospects for Tejon Ranch Co. (TRC)
Analysis of Key Growth Drivers
The company is actively pursuing several growth drivers including:
- Product Innovations: The farming segment has seen significant growth in almond sales, with revenues reaching $1,503,000 for the three months ended September 30, 2024, compared to $581,000 in 2023, reflecting a 159% increase.
- Market Expansions: The company is expanding its real estate developments, notably the Grapevine project, which is expected to include 12,000 homes and 5.1 million square feet of commercial space.
- Acquisitions: Investments in water assets totaling $4,616,000 were made to secure long-term resources for agricultural and development needs.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the first nine months of 2024 was $23,951,000, a decrease from $28,572,000 in 2023. The main contributors to revenue include:
- Farming revenues of $4,249,000, down from $4,852,000 in 2023.
- Ranch operations revenues of $3,518,000, slightly up from $3,384,000.
Future projections indicate a focus on improving farming revenue through enhanced production practices and crop management.
Strategic Initiatives or Partnerships
The company has established significant partnerships through joint ventures, with equity in earnings from such ventures amounting to $7,611,000 for the nine months ended September 30, 2024, representing a 65% increase from $4,616,000 in the previous year.
Notable joint ventures include:
- Petro Travel Plaza Holdings, LLC with earnings of $6,004,000, a 45% increase from $4,128,000.
- TRC-MRC 2, LLC contributing $1,443,000, up 38% from $1,042,000.
Competitive Advantages
The company maintains several competitive advantages that position it for future growth:
- Geographic Location: The land owned provides strategic advantages for real estate developments, with access to major markets.
- Diverse Revenue Streams: The company operates across multiple segments including farming, ranch operations, and mineral resources, allowing for risk diversification.
Growth Opportunities Table
| Growth Driver | Current Status | Projected Impact |
|---|---|---|
| Almond Revenue Growth | $1,503,000 (2024) | Continued increase expected due to higher pricing and crop availability. |
| Grapevine Development | 12,000 homes planned | Significant future revenue from residential sales. |
| Joint Ventures | $7,611,000 equity earnings | Increased earnings expected from strategic partnerships. |
| Water Asset Investments | $4,616,000 invested | Long-term cost savings and resource security. |
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Resources:
- Tejon Ranch Co. (TRC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Tejon Ranch Co. (TRC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Tejon Ranch Co. (TRC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.