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About St. Joe Company

Florida and specialization.

Two things that are quite beautiful to my eyes, as Florida is, well, a haven of land wrapped around by the Atlantic Ocean, enveloping the calm and quiet nook of Boca Raton and adjacent high roller highway by the name of West Palm Beach, along with hustle and bustle at and near the Port of Miami (shoutout to Rick Ross, of course), not neglecting the midsection of the state near where the magic happens (no, really the Magic), in where else but Orlando, and many other treasured regions and beloved regions of Florida.

On the other matter, specialization is great because, as most people realize, in any context it is far better to focus on one thing, and one thing only, and be really, really excellent at that one thing, as opposed to stretching oneself too thin and becoming a jack of all trades and a master at none, pretty much always leaving you back at square one.

For instance, Wingstop focuses primarily on chicken wings and things have turned out pretty well for them so far, and the company that we will be analyzing today just so happens to be focused on real estate in the Northwest Florida region(s), plotting, building and generating revenue and income through the properties it puts down.

Headquartered in Panama City Beach, Florida (it’s absolutely gorgeous out there, by the way, or “bee tee dubs,” as the kids phonetically say), the St. Joe Company operates a whole host of venues concentrated in Florida, from golf clubs and courses and luxury resorts and other specialty lodging territories, along with higher-end retail venues to homes within, let’s say, swankier residential communities in Northwest Florida.

St. Joe has found its niche and we love that, and it’s share price (NYSE: JOE) has for sure found its groove in recent years, yielding a return of approximately 200% over the last five years, which I am sure shareholders during this era just ate up, however, like any good investor knows, past performance is far from being any sort of firm indicator of future performance.

With that being said, must we even express some of our general concerns regarding the regional and even more macroeconomic concerns we have with this company, and other real estate development firms for that matter?

The undisputed fact of the matter is that St. Joe Company operates in one of the more sensitive supply and demand industries out there, as we have seen time and time again, when housing is good, all is good, but when it turns sour, well, an event as catastrophic and fatal as 2008 could happen, and an extraordinary event such as this one isn’t always all that extraordinary, but really, inevitable.

All we are saying is prior to even merely pondering an investment in this company’s stock, it would be a splendid idea to devise one’s personal opinion on the real estate sector not only in Florida, but also in the United States and around the globe, as this company’s stock will likely move on these axes, more than anything else, at least from where we stand.

At the end of the day, St. Joe is a real estate development company that generates the bulk of its revenues (and profits for that matter) through the development and renting out of its properties, receiving monthly checks from its tenants across a host of different segments, more specifically, not just from apartment or individual housing tenants, but also through lodging and recreational facilities as well, among other smaller but significant revenue streams, and it is definitely a positive that many of its clients are from the more affluent crowds, giving us some assurance that the revenue fountain won’t likely run dry anytime soon, as (generally speaking) irrespective of the greater overall state of the economy, the wealthy will more likely than not be able to retain and continue paying for their luxury housing, clubs and other residential and retail amenities.

At face value, we like the company and what it does, and again, its niche, however, let’s see if the core financial figures and other pertinent ratios and data points favor St. Joe just as much, if not even more.

St. Joe’s stock financials

With a prevailing market capitalization of $3.18 billion and an associated share price of $54.45, the St. Joe Company has a price-to-earnings (P/E) ratio of 33.72 along with an annually distributed dividend of $0.48, which to us isn’t all that significant, however, a dividend hardly hurts and we appreciate any reasonable, sustainable reward offered to a company’s shareholders for, well, doing what they tend to do best and holding shares.

What we do initially deem to be significant, however, is the company’s present price-to-earnings ratio, as it is well above the standard, commonly held fair value benchmark of 20, indicating that this company’s stock (NYSE: JOE) is trading at a fairly rich valuation for the time being, which, with a relative share price increase of nearly double and then double again, makes some sense, as we have seen quality companies’ share prices get ahead of themselves every so often.

However, if St. Joe has the annual revenue growth to back this valuation up, it might be worth some more consideration, however, given all of the (admittedly very little) facts and figures we have up to this point, we aren’t thrilled with this company’s current valuation, again, on the basis of its price-to-earnings ratio, acting as a primary valuation metric.

Prior to delving into the state of the company’s recent year-over-year (YOY) revenues, it would undoubtedly serve us well to get a glimpse of the company’s balance sheet.

Specifically, the company’s executives are reportedly in charge of tending to and taking care of around $1.4 billion in terms of total assets along with $800 million in terms of total liabilities, which, especially for a company operating mainly within the real estate sector, is a great overall balance sheet structure, all things considered, as St. Joe is assuredly total asset-heavy and can seemingly afford to venture into new projects as the opportunities present themselves in their neck of the woods, while also perhaps building off of their current properties.

All in all, this is a great balance sheet breakdown, especially as real estate companies are quite well known for having more heightened debt loads.

Now, for one of the company’s main attractions, its income statement, and more specifically, the revenues to be found on the statement in question.

In short and sweet terms, St. Joe’s YOY annual revenues (measuring since 2018) have been generally growing, starting off at a relative base of $110.2 million (2018), generally pushing upwards and rightwards to its most recently reported and displayed figure of $252.3 million (2022), however, experiencing some softening between 2021 and 2022, as the company’s aggregate revenue in 2021 stood at just shy of $267 million, evidently moving down (just a little) in the following year, perhaps just generally speaking to the holes to be poked with respect to seasonal weakening within the real estate sector and the segments, regions and consumers that St. Joe serves.

We aren’t terribly concerned with this, but it still remains a factor, not to mention that even after this past and prevailing year-over-year revenue growth and the current uncertainty surrounding the greater overall real estate sector, we still do not view the company’s revenues as growing fast enough to justify overpaying for this much of a premium, ultimately more so incorporating our personal views regarding the doom and gloom we deem to be hurtling towards the real estate sector, especially as commercial real estate markets, even in the largest of cities, continue softening.

We just don’t feel good about where the commercial real estate market is right now, honestly, and you bet that is playing a significant role in our relative valuation of this here Floridian company.

On the basis of the company’s cash flow statement, St. Joe’s net income and total cash from operations (again, measuring since 2018) have been solid, overwhelmingly representing a rather substantial portion of its previously mentioned revenues, implying (per the data, that is) that this company is pretty good at generating cash flows.

Let’s check the flow relative to the competition’s flow.

St. Joe’s stock fundamentals

Moreover, according to the figures displayed on TD Ameritrade’s platform, there is quantifiable confirmation to these rational assumptions, indeed, as St. Joe’s trailing twelve month (TTM) net profit margin is listed as tall as 18.42% to the industry’s respective average of a far punier 0.07%, hardly scraping any profit (on a net basis, specifically, meaning after all of the expenses associated with operating one’s business), whereas St. Joe’s has seemingly maintained a quite capital efficient, profitable posture that has candidly put the industry’s average to shame, which, as prospective shareholders, is great to see.

Speaking of efficiencies, the company’s comparable TTM returns on both assets and investment(s) are both in great places as well, with, for example, St. Joe’s TTM return on investment sitting high and pretty at 4.96% to the industry’s respective average of 1.03%, with the company’s TTM return on assets sitting in a similar stature to the industry’s average figure as well, ultimately hinting at the fact that St. Joe has developed a better track record of planting down the right investments in the right regions, and with that, it is sort of hard to believe that it will lose its way in this context anytime soon.

Should you buy St. Joe stock?

Right now, this company’s stock (NYSE: JOE) is a bit too rich for our blood, even though it is (according to the previously outlined and mentioned numbers) as a matter of fact, the real deal.

In pretty much every other respect, St. Joe has a lot going for itself, with a balance sheet that is one for the books (again, in the real estate setting especially), an affinity and might we even say a natural ability to ooze cash from its business operations, an appetite for outpaced and generally continued annual revenue growth and incredibly impressive TTM net profit margin and core return metrics, however, the valuation is certainly a sticking point, not to mention our personal bearish beliefs with respect to the commercial real estate market during the time of this publication.

Therefore, in the interest of objectivity, we deem it best to offer this company’s shares (NYSE: JOE) a “hold” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.

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