Is Public Storage Stock Due for a Correction?

PSA is scheduled to report Q4 earnings on February 22

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Public Storage (NYSE:PSA) is the world’s largest owner, operator, and developer of self-storage facilities serving more than one million customers. PSA operates 2,678 self-storage facilities located in 39 states with approximately 186 million net rentable square feet in the United States. At last glance, PSA was trading down 0.3% at $350.58.

At the end of January, Public Storage announced that it intends to release fourth-quarter earnings after the market closes on Tuesday, Feb. 22. A conference call is also scheduled for Wednesday, Feb. 23, for the senior leadership team at PSA to discuss the financial results and current outlook.

Most recently, for the third quarter of 2021, Public Storage reported an earnings per share (EPS) of $2.52. As for the upcoming fourth quarter of 2021 results, Wall Street analysts project that PSA will report a drop in earnings down to $2.17 per share. 

Public Storage stock has increased a decent 52% year-over-year and PSA is currently trading up 54% since its 52-week low of $226.54 last February. Shares of PSA have decreased 6% year-to-date and has shed 4% after reaching an all-time high of $377.36 on December 31. Moreover, Public Storage offers a forward dividend of $8.00 with a dividend yield of 2.28%.

However, Public Storage stock’s valuation is undeniably rich despite the growth the company has produced. PSA currently trades at a price-earnings ratio of 41.99 and a price-sales ratio of 19.23. Public Storage stock also has a forward price-earnings ratio of 36.76, which is an improvement but still signals an inflated valuation. Additionally, the self-storage company has a weak balance sheet with $958 million in cash and $5.77 billion in total debt, making Public Storage stock's short- and long-term outlooks fairly uninspiring.

In the options pits, puts rule the roost, albeit amid light absolute volume. This is per Public Storage stock's 50-day put/call volume ratio of 3.72 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That ratio sits higher than all but 2% of readings in its annual range, suggesting a much healthier-than-usual appetite for puts in the last 10 weeks.

Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 2.23, which ranks in the 99th annual percentile -- highlighting a massive appetite for puts among short-term speculators, as well. 

Those options traders are in luck, because the stock's Schaeffer's Volatility Scorecard (SVS) sits at a 96 out of 100. This means the security has exceeded option traders' volatility expectations during the past year.

 




 
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