高盛-美国不动产

28August2024|7:08PMEDT

AmericasRealEstate:REITs:Storagecheckin:Move-inrates,housingactivity,andsupplyoutlookimproving

Wereviewstoragemove-inrentalrateperformance,housingactivity,andsupply

CaitlinBurrows

+1(212)902-4736|

forecasts:Whilemove-inratesonaYoYbasisarenegative,theyareimproving,with

caitlin.burrows@

GoldmanSachs&Co.LLC

easycompsahead.Further,wereviewhousingsaleactivityasademanddriverand

JeremyKuhl

itsrelationshiptomove-inrateperformance.Lastlyweupdateoursupplyforecasts

+1(212)357-1704|jeremy.kuhl@GoldmanSachs&Co.LLC

andreviewkeytakeawaysfromtheYardiFall2024outlookwebinar.WeareBuy

YashasGilganchi

ratedonbothPSAandEXR.

+1(332)245-7559|

yashas.gilganchi@GoldmanSachsIndiaSPL

Move-inrateupdate:YoYgrowthstillnegative,buttrendingbetterwitheasycompsahead

Duringtheir2Q24earningscalls,EXRandPSAdiscussedthepricesensitivityofnewcustomershadcontinued,resultinginlowermove-inrents.Asaresult,PSAlowereditsguidancetoincorporatetheweakermove-inrateenvironment.Below,wereviewwhatPSA’sguidanceentailsandhowmove-inratesaretrending:

nPSAguidancemidpointincorporatesnewcustomermoveinratesare-12%YoYonaverageovertheyearandnegativemid-singledigitsbyyear-end(Exhibit1)

nThecadenceofPSAy/ymove-inrentssofarin2024hasbeen-16%in1Q,-14%in2Q(withJuneat-12%),and-12%inJuly,i.e.,slowlyimproving(Exhibit2)

nYarditracksnationwidestreetratesormove-inratesforstorageoperators(publicandprivate).Whilethetrendsforpublicvs.privateoperatorsdiffer(Exhibit

_

2,seemoreonthisbelow),webelievetheYardidatacanprovidedirectionalinformationonhowmove-inratesaretrending:

oAccordingtoYardi,inJuly,theaverageannualizedsame-storeaskingrentpersquarefootwas$16.40nationwideforthecombinedmixofunitsizesandtypes.ThisrepresentsaYoY-4.1%decrease(vs.-4.9%lastmonth)

andMoM-0.4%decrease(vs.+0.2%lastmonthor-0.8%inJuly2023).

Whilestreetratesremainnegativey/y,thetrendisimprovingandcompsshouldbeeasierin2H24.

oBreakingoutstreetratesbetweenpublicandprivateoperators,YardinotedinJulythatsame-storeadvertisedrentsatstabilizedpropertiesare-5.3%YoYforREIToperatorsinJulyversus-3.7%fornon-REITcompetitors.As

GoldmanSachsdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthis

report.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegACcertificationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto

/research/hedge.html.Analystsemployedbynon-USaffiliatesarenotregistered/qualifiedasresearchanalystswithFINRAintheU.S.

GoldmanSachsAmericasRealEstate:REITs

notedabove,PSAreported-12%moveinratesforJuly.Whilethenumbersvary(forexamplebetweenREITsandnon-REITsorwithinREITs,seeExhibit3forEXRvs.PSA),acrossallthevariouswaystocategorizethedata,itappearsthatstreetratesormove-inratesareimprovingonaYoYbasis,whichshouldhelpsupportrevenueandinturnearningsgrowth.

Exhibit1:MidpointofPSAguidanceassumesthatECRIcannotfullymake-upforthenewcustomershortfall

PSAestimatedsamestorerevenuegrowthbreakout,incorporatingmidpointguidance

Exhibit2:PSAmove-inratesaremorevolatilethantheindustryasawhole,whichwebelieve,reflectsthedemandenvironmentat

thattime

YoYstreetrategrowthandYoYPSAmoveinrategrowth,4Q18-July2024

GuidanceMidpointAssumptions

Avg.moveinrate(-12%vs'23)

Avg.moveoutrate(-1.5%vs.'23)

Revenue%chgfromnewcustomerspread

ECRIfornewercustomersECRIformidcustomers

ECRIforlongercustomersRevenuegrowthmix

$13.74

$21.02

-35%

35%

15%

7%

-1.0%

Weighting

30%10%20%40%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%

-10.0%

-20.0%

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q20

1Q21

2Q21

3Q21

4Q21

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

1Q24

2Q24

JULY

YardistreetratesYoYGrowthPSAmoveinrateYoYgrowthPSAAvg.MoveinrateYoY%chg

Assumesflatoccupancy

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

PSAaverageislongtermaveragefrom1Q13-July2024

Source:Companydata,Yardi,GoldmanSachsGlobalInvestmentResearch

Exhibit3:EXR’smovein/moveoutheadwindislessthanforPSA

2Q24PSAandEXRsamestoremove-inandmove-outmetrics

2Q24

MoveinYoYChgMoveOutYoYChg

MoveinMoveOutSpread

EXR

-8.3%-4.3%-25.7%

PSA

-14.4%-1.4%-31.8%

_

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

Driversofdemand:housingremainsinfocus

Asinvestorsandstorageoperatorscontinuetomonitorthehousingenvironment,wereviewkeystatsaroundthetopic:

nPSAmentionedduringits1Q24earningscallthatamongdemanddriversfor

customers,homesalesaccountfor15%ofcustomers,rentersmovingaccountfor40%-45%ofcustomers,15%-20%arecustomerswhoneedmorespaceathome(thisislargerthanprepandemiclevels)andtherestisotherreasons.

nEXRprovidedsimilarnumbersduringits1Q24earningscallandmentionedthat

fromtheirtenantsurveys:51%ofcustomersusestoragebecausetheyaremoving,whereabouthalf(45%)ofthat51%ismovingfromapartmenttoapartment.The

peakofcustomersusingstoragebecausetheyaremovingwas61%in3Q21.

28August20242

GoldmanSachsAmericasRealEstate:REITs

nReviewingYardidataonreasonsforwhypeopleusestorage,itappearsthatlisting“moving”or“downsizing”asareasonhasdroppeddramaticallywhilethereason“nothavingenoughspaceathome”hasincreased(Exhibit4).Webelievethis

makessensegiventhelackofhomesalesoccurring.

GiventheinterestinhomesalesasadriverofdemandwereviewtherelationshipbetweenhomesalesandPSAmove-inrentalrates:

nWefindthatYoYchangeinexistinghomessaleshada59.5%correlationwithPSAmoveinrateYoYchange(from1Q14-2Q24).

nWenotethatthecorrelationissomewhatweakerwhenlookingattotalnumberofhomessold(correlationof52.1%)whichincludesnewhomesalesYoYgrowth

(-11%correlation).WebelievetheweakcorrelationwithnewhomesalesYoYgrowthcouldbeattributedtosmallernumbersresultinginmorevolatilenumbers,andnewhomesalesbeingmoreafunctionofsupply,inventory,anddeliverytimingrather

thandemandcomparedtoexistinghomesales.

nAlternativelywereviewtheYoYchangeinmortgagepurchaseapplicationscomparedtotheYoYchangeinPSA’smove-inrate,whichhasalowercorrelation:30.6%.

Wenotethatthe59.5%correlationissizable,butnotoverwhelming,whichmakes

sensetous,giventhatotherfactorsalsoimpactmove-inratesandstoragedemand(seesectionabove).However,webelieveashousingactivityincreases,moveinrates

canimprove,drivingearningsresultsandstockperformance.

Further,webelieveinvestorscontinuetobeinterestedinwhetherinterestratecuts

laterintheyearcanprovideanoff-seasonal-cyclepickupinhousingactivityandinturnstoragedemand,orwouldittakeuntilnextbusyseason(spring/summer2025)forthattooccur.EXRandPSAnotedthattheydonotexpectanddonotanticipatehousing

demandtorecoveranddrivedemandin2024.

Exhibit4:Movinghasbecomelessofareasonwhypeopleusestorage

_

Reasonsforusingstorage

Exhibit5:Move-inratesappeartobepartiallydrivenbyhousingsales

YoYchangeinPSAmoveinrates,numberofhousesold(total,existing,new)

NothavingenoughspaceathomeMoving(otherthandownsizing)

Downsizing

Changesinhouseholdsize

StoringforbusinesspurposesHomerenovation

Other

TOTAL

August2022

25%

27%

32%

5%

3%

2%

6%

100%

July2024

42%

25%

7%

7%

7%

4%

8%

100%

1Q14

3Q14

1Q15

50.0%40.0%30.0%20.0%10.0% 0.0%-10.0%-20.0%-30.0%-40.0%

3Q18

1Q18

3Q17

1Q17

3Q16

1Q16

3Q15

1Q19

Total#ofhomessold(YoY)ExistingHomeSales(YoY)

1Q22

3Q21

1Q21

3Q20

1Q20

3Q19

3Q22

1Q23

3Q23

1Q24

NewHomeSales(YoY)

PSAmoveinrateYoYchg

Source:Yardi,GoldmanSachsGlobalInvestmentResearchSource:NationalAssociationofRealtors(NAR),Companydata,GoldmanSachsGlobal

InvestmentResearch

28August20243

GoldmanSachsAmericasRealEstate:REITs

Supplyupdate:maybelessincomingin2025and2026

In2024,therehasbeenalotofinvestorfocusonmove-inratesanddemandandlessonsupply.However,asnewsupplyhasalargeimpactonrevenue,weupdateoursupply

outlookandnote:

nNewsupplyisexpectedtodeclinein2025and2026(Exhibit6).

nThisisimportantasYoYgrowthforrentpersqftforEXRandPSAappearstobeinverselyrelatedwithYoYsupplygrowth(Exhibit7).

Exhibit6:Newstoragecompletionsareexpectedtobelessin‘25&‘26

Completionsas%ofstockacrosssectorsacrosstime,2000-2026E

Exhibit7:EXRandPSAarebetterabletopushpricewhenthereislessincomingsupply

RentpersqftforEXRandPSAYoYgrowthandYoYsupplygrowth1Q08-2Q24

3.5%

NetCompletionsasa%ofstock

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

-0.5%

-1.0%

SupplyGrowth-YoY%Chg

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024E

2025E

2026E

AptOfficeRetailIndustrialStorageMalls

22.5%20.0%17.5%15.0%12.5%10.0%7.5%5.0%2.5%0.0%-2.5%-5.0%

3.5%

YoY%Chg:Rent/Occ.Sqft

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%

1Q081Q101Q121Q141Q161Q181Q201Q221Q24SupplygrowthEXRandPSAavgYoY%Chg

Source:Companydata,Yardi,GoldmanSachsGlobalInvestmentResearch

CensusBureauandYardiareusedforStorage.CoStarisforallothersectors.

Source:CoStar,CensusBureau,Yardi,GoldmanSachsGlobalInvestmentResearch

Atthesametime,weacknowledgethatasofSeptember2023(seeExhibit10here),

Yardi’sexpectationsfor2023and2024supplywerelowerthanthecurrentoutlook,i.e.,thenewcompletionsin2023and2024haveendeduptobemoresignificant.So,we

_

willwatchforfuturerevisionsandrealizethesupplyoutlookforstoragemayberevisedmoresignificantlythanotherpropertytypes.

Yardifall2024outlooktakeaways

OnAugust28,2024,YardihelditsSelfStorageNationalOutlook-Fall2024webinar.Wereviewkeytakeawaysbelow:

Demanddrivers:multiplefactorsatwork

nMigrationhasbeenatailwind,especiallyincertainmarkets:Internationalnetmigrationhasincreased,boostingbroaddemand;whileWesternandsouthernstateshaveexperiencedpopulationgrowth,drivinganextraneedforstorage.

nHomesalesasapercentageofhouseholdsislow,atGFClevels,pressuringdemand.Regionally:

oMidwestandMountainWestregionshavebeenthebestperformingregions

28August20244

GoldmanSachsAmericasRealEstate:REITs

intermsofhomesalesasapercentageofhouseholds

oOnaYoYbasis,coastalmarketshaveperformedbestintermsofhomesalesasapercentageofhousehold

Move-inorstreetrates:Dependsonthemarket

CommentarymentionedthatmarketswithmoreREITpropertieshavehadslowerrentgrowthduetoloweradvertisedratesbutalsoduetosupply.Furthercorresponding

detailsinclude:

nREITmoveinratestendtobe8%lowerthancompetitorsinmarketswithamixofREITandnon-REIToperators.REITsaccountfor36%ofsqftnationwide.

nMarketswithnewersupplyneedtobeevenmoreaggressivewithmove-inratepricingtoattractcustomersandobtainoccupancy

Markets:YardicommentaryaligningwithPSAandEXRcommentary

TheYardicallmentionedthatMidwest,Northeast,andWesternmarketshavebeenbetter,whiletheSunbeltishamperedbynewsupply.

nWeakestmarketsincludeLasVegas,Orlando,Phoenix,SouthwestFlorida.Yardi

believesthesemarketscouldtakeuntil2025toimprovewhen:homesaleactivityimproves,migrationtrendspickup,andsupplyisabsorbed.

nTopmarketsincludeonesthatwereweakerpreviouslyduetotoomuchsupplythatarebetter:NYC,Portland,Seattle,DC,andDenver

Additionally,smallermarketperformancehasbeenbetterduetolackofREITpresence(orsaidanotherwaylesscompetitionorsupply)

Supply:Shouldbelessofaheadwindinthefuture

_

Yardi’s2024supplydeliveryforecastisa9.4%declinefrom2023.Furtherdetailsincluded:

n70%oftheincomingsupplyisnewbuildsandtheremaining30%iseitherconversionorexpansion

nNewersupplyhasbeenfocusedonsmallerunitsduetobettereconomics,butinthecurrentenvironment,smallerunitshavebeenperformingpoorlyduetotheneedtoleaseupthepropertiesandgainoccupancy

nDevelopmentisbecomingmoredifficultasthenumberofdaysineachpartoftheconstructionprocessistakinglongerandmoreprojectsarebecomingabandoned

nYTD,mostloanshavegonetolessexperienceddevelopersinsmallermarkets

o60%ofloansin2024havebeentofirsttimedeveloperswhenhistoricallythatnumberhasrangedfrom30%-50%.Webelievethiscouldresultinahigher

amountofprojectsnotreachingcompletion.

oDevelopmentYTDhasbeenmorefocusedinsmallermarketsintheSunbeltandNortheast,outsidethetop60markets.

28August20245

Premium/Discount

GoldmanSachsAmericasRealEstate:REITs

Valuation:potentialfundamentalrebound(drivenbyhousing)startingtobepricedin

Exhibit8:StorageREITsaretradingattheirhistoricalpremiumtoREITsoverall

StorageNTMconsensusFFOmultiples,1Q16topresent

Exhibit9:EXRistradingatapremiumtoPSA

EXRandPSANTMconsensusFFOmultiples,1Q16topresent

FwdFFOMultiple

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

3Q19

1Q20

3Q20

30.0x

25.0x

20.0x

15.0x

10.0x

5.0x

0.0x

StorageAvg(LHS)REITs(LHS)

StoragevsREITsAvg(RHS)

1Q21

3Q21

1Q22

3Q22

1Q23

3Q23

1Q24

3Q24

40.0%35.0%30.0%25.0%20.0%15.0%10.0%5.0%

0.0%

-5.0%-10.0%

StorageAvg(LHS)

StoragevsREITs(RHS)

StorageandREITaverageismarketcapweightedSource:FactSet

FwdFFOMultiple

30.0x

25.0x

20.0x

15.0x

10.0x

5.0x

30.0%

20.0%

10.0%

0.0%

-10.0%

-20.0%

Premium/Discount

0.0x

-30.0%

1Q16

3Q16

1Q17

3Q17

1Q18

3Q18

1Q19

3Q19

1Q20

3Q20

1Q21

3Q21

1Q22

3Q22

1Q23

3Q23

1Q24

3Q24

PSA(LHS)

EXRvsPSA(RHS)

EXR(LHS)

EXRvsPSAAvg(RHS)

Source:FactSet

InExhibit10,weshowTTM2025FactSetconsensusestimaterevisionsbyREITpropertytype,sharepricemovement,andthecorrespondingmultipleexpansion.

Interestingly,Storagehashadoneofthestrongestmultipleexpansions,whileestimaterevisionshavebeenbelowaverage.Thisiscounter-intuitive,aswewouldnormally

expectthecompanieswiththestrongestestimaterevisionstohavethestrongestsharepriceperformance;thedifferenceisevenmoreextremeforoffice,withweakerestimaterevisionsandstrongersharepriceperformance.Asaresult,Exhibit11showsthatthe

relationshipbetweenestimaterevisionsandsharepriceperformanceovertheTTMhasbeenquiteweak.

Exhibit10:2025storageREITmultipleshaveexpandedmorethantheREITaverageovertheTTM...

_

Consensus2025FFOPSestimaterevisions,sharepriceperformance,andmultipleexpansion/contractionbypropertytype

Exhibit11:...despitenegativeestimaterevisions.Estimaterevisionshavenotbeenagoodpredictorofsharepriceperformanceoverthe

TTM.

2025estimaterevisionsversussharepriceperformance

TotalMarketEstimatePrice2025EFFOMultiple

SubsectorCap($mn)ChangeChange8/27/238/27/24

Malls$58,220-1.3%51.3%8.6x13.2x

Office$27,635-11.0%34.3%7.8x11.7x

Storage$97,742-8.1%29.9%14.4x20.3xOutlet$3,3166.4%34.7%10.9x13.8xApartments$124,655-4.1%17.1%15.0x18.3xStripCenters$28,3820.6%22.6%11.2x13.5xTripleNet$63,128-0.1%13.3%12.5x14.1xIndustrial$133,719-5.6%6.0%19.2x21.6xSingleFamily$36,499-1.3%8.6%17.6x19.4xGaming$48,7160.9%9.4%12.8x13.9xREITsMktCapWtdAvg-3.9%19.5%14.4x17.6xS&P5000.7%27.7%16.0x20.3x

Marketcapweighted

Source:FactSet,GoldmanSachsGlobalInvestmentResearch

MultipleExpansion

53.3%53.2%41.7%26.6%22.0%21.8%13.3%12.3%10.1%8.4%24.7%26.8%

100.0%

Sharepriceperformance

REITs

80.0%

Storage

60.0%

40.0%

EXRPSA

20.0%

0.0%

-20.0%

-50.0%-40.0%-30.0%-20.0%-10.0%0.0%10.0%

Consensusestimaterevisions,2025FFO

Source:FactSet

Exhibit12andExhibit13comparethey/ygrowthrateofagivenquartertothe

correspondingNTMmultipleatthattime,foreachofEXRandPSA.Whileeachhasa

28August20246

GoldmanSachsAmericasRealEstate:REITs

positiveslope,suggestingthecompaniestradeathighermultipleswhenearnings

growthishigher,therelationshipisnotthatstrong.Today,wenotethatthecurrent

multiplesaretradingabovetheimpliedmultiplebasedonearningsgrowthforthe

quarter(3Q24E).Webelievethatcanbeattributedtotheknownperceivedweaknessingrowthinthenearterm(3Q24and4Q24)andtheexpectedearningsgrowthrecoveryin2025onward.Webelieveinvestorsarewillingtooverlookshort-termearningsgrowth

weaknessinanticipationoffuturerecovery.

Exhibit12:EXRmultipleseemstobehighbasedonprojectedearningsgrowthcomparedtothehistoricrelationship

1Q17-3Q24EEXRmultipleandearningsgrowth,recentquartersinred

Exhibit13:PSAmultipleseemstobehighbasedonprojectedearningsgrowthcomparedtothehistoricrelationship

1Q17-3Q24EPSAmultipleandearningsgrowth,recentquartersinred

28.0x

4Q21

26.0x

1Q22

24.0x

3Q19

22.0x1Q233Q24E3Q22

2Q19

4Q2321QQ11892Q21

20.0x2Q234Q19

1Q148Q182Q22

1Q241Q203Q172Q17

18.0x2Q243Q181Q21

3Q204Q201Q17

16.0x3Q232Q20

14.0x

12.0x

10.0x

-15.0%-5.0%5.0%15.0%25.0%35.0%

3Q21

45.0%

24.0x23.0x22.0x21.0x20.0x19.0x18.0x17.0x16.0x15.0x

3Q19

2Q19

2Q181Q17

4Q1Q114Q91717

3Q24E

3Q201Q24

4Q8Q1181Q20

1Q211Q232Q23

4Q20

4Q23

2Q24

3Q23

2Q20

14.0x

-10.0%-5.0%0.0%5.0%10.0%15.0%

1Q22

4Q21,

2Q21

3Q212Q22

3Q224Q22

20.0%25.0%30.0%35.0%

Source:FactSet,Companydata,GoldmanSachsGlobalInvestmentResearchSource:FactSet,Companydata,GoldmanSachsGlobalInvestmentResearch

Pricetargetandrisks

EXR

Pricetarget:Our12-monthpricetargetis$188andisbasedonanunchangedQ5-Q8targetAFFOmultipleof22.6x.WeareBuyratedonEXR.

_

Downsiderisks:SlowerorlowerrevenueorexpensesynergiesfromtheLSIacquisition(closedinJuly2023),lower-than-expectedrentalratesandoccupancywouldaffectour

samestoregrowthestimates,highersupplygrowth,occupancydeclinemorethanexpected,sloweracquisitionanddevelopmentlease-up,highermarketingexpensegrowth,lower-than-expectedacquisitionanddevelopmentvolumesandcaprates,

slowergrowthinEXR’sbridgeloanprogramoralternativeexternalgrowthventures.

PSA

Pricetarget:Our12-monthpricetargetis$343andisbasedonanunchangedatQ5-Q8targetAFFOmultipleof21.6x.WeareBuyratedonPSA.

Downsiderisks:Lower-than-expectedrentalrateandoccupancygrowthcould

negativelyaffectoursamestoregrowthestimates,highersupply,moresignificant

occupancydeclines,sloweracquisitionanddevelopmentlease-up,highermarketingexpensegrowth,lower-than-expectedacquisitionanddevelopmentvolumesandcaprates,increaseinPSA’scostofdebt.

28August20247

GoldmanSachsAmericasRealEstate:REITs

DisclosureAppendix

RegAC

We,CaitlinBurrows,JeremyKuhlandYashasGilganchi,herebycertifythatalloftheviewsexpressedinthisreportaccuratelyreflectourpersonal

viewsaboutthesubjectcompanyorcompaniesanditsortheirsecurities.Wealsocertifythatnopartofourcompensationwas,isorwillbe,directlyorindirectly,relatedtothespecificrecommendationsorviewsexpressedinthisreport.

Unlessotherwisestated,theindividualslistedonthecoverpageofthisreportareanalystsinGoldmanSachs’GlobalInvestmentResearchdivision.

GSFactorProfile

TheGoldmanSachsFactorProfileprovidesinvestmentcontextforastockbycomparingkeyattributestothemarket(i.e.ourcoverageuniverse)anditssectorpeers.Thefourkeyattributesdepictedare:Growth,FinancialReturns,Multiple(e.g.valuation)andIntegrated(acompositeofGrowth,FinancialReturnsandMultiple).Growth,FinancialReturnsandMultiplearecalculatedbyusingnormalizedranksforspecificmetricsforeachstock.The

normalizedranksforthemetricsarethenaveragedandconvertedintopercentilesfortherelevantattribute.Theprecisecalculationofeachmetricmayvarydependingonthefiscalyear,industryandregion,butthestandardapproachisasfollows:

Growthisbasedonastock’sforward-lookingsalesgrowth,EBITDAgrowthandEPSgrowth(forfinancialstocks,onlyEPSandsalesgrowth),withahigherpercentileindicatingahighergrowthcompany.FinancialReturnsisbasedonastock’sforward-lookingROE,ROCEandCROCI(forfinancial

stocks,onlyROE),withahigherpercentileindicatingacompanywithhigherfinancialreturns.Multipleisbasedonastock’sforward-lookingP/E,P/B,price/dividend(P/D),EV/EBITDA,EV/FCFandEV/DebtAdjustedCashFlow(DACF)(forfinancialstocks,onlyP/E,P/BandP/D),withahigherpercentileindicatingastocktradingatahighermultiple.TheIntegratedpercentileiscalculatedastheaverageoftheGrowthpercentile,FinancialReturns

percentileand(100%-Multiplepercentile).

FinancialReturnsandMultipleusetheGoldmanSachsanalystforecastsatthefiscalyear-endatleastthreequartersinthefuture.Growthusesinputsforthefiscalyearatleastsevenquartersinthefuturecomparedwiththeyearatleastthreequartersinthefuture(onaper-sharebasisforallmetrics).

ForamoredetaileddescriptionofhowwecalculatetheGSFactorProfile,pleasecontactyourGSrepresentative.

M&ARank

Acrossourglobalcoverage,weexaminestocksusinganM&Aframework,consideringbothqualitativefactorsandquantitativefactors(whichmayvaryacrosssectorsandregions)toincorporatethepotentialthatcertaincompaniescouldbeacquired.WethenassignaM&Arankasameansofscoring

companiesunderourratedcoveragefrom1to3,with1representinghigh(30%-50%)probabilityofthecompanybecominganacquisitiontarget,2representingmedium(15%-30%)probabilityand3representinglow(0%-15%)probability.Forcompaniesranked1or2,inlinewithourstandard

departmentalguidelinesweincorporateanM&Acomponentintoourtargetprice.M&Arankof3isconsideredimmaterialandthereforedoesnotfactorintoourpricetarget,andmayormaynotbediscussedinresearch.

Quantum

QuantumisGoldmanSachs’proprietarydatabaseprovidingaccesstodetailedfinancialstatementhistories,forecastsandratios.Itcanbeusedforin-depthanalysisofasinglecompany,ortomak