We came across a bullish thesis on Extra Space Storage Inc. (NYSE:EXR) on Monopolistic Investor’s Substack by Antoni Nabzdyk. In this article, we will summarize the bulls’ thesis on EXR. Extra Space Storage Inc. (NYSE:EXR)'s share was trading at $148.09 as of Dec 27^th. EXR’s trailing and forward P/E were 39.49 and 28.82 respectively according to Yahoo Finance.

A row of self-storage units in a self-storage complex, showing the affordability and security offered by the company.

Extra Space Storage Inc. (NYSE:EXR) is a self-storage REIT that operates across the United States, offering customers convenient and secure storage solutions. The company thrives on a straightforward yet strategically executed business model: identifying high-traffic areas in growing markets, acquiring or developing facilities, and leasing them to customers. This targeted approach ensures steady demand and maximizes operational efficiency.

EXR's financial metrics reflect its solid market position. With a return on invested capital (ROIC) of 3.44%, return on assets (ROA) of 3.33%, and return on equity (ROE) of 5.57%, the company demonstrates financial stability despite operating in a capital-intensive industry. At its current price of $148.09, EXR trades at a significant discount to its fair value estimate of $233.84, presenting an attractive opportunity for investors. This undervaluation highlights the potential for a substantial upside as the company continues to benefit from strong fundamentals and a robust demand environment.

Revenue growth for EXR has been dynamic, driven by its ability to leverage its extensive footprint and operational scale. While its smaller size relative to some competitors allows for more pronounced growth spikes, EXR maintains a consistent trajectory of expanding market share. Its profit margin of 24.41% underscores its efficiency, though it trails behind industry leaders. Nonetheless, EXR's disciplined capital management and focus on customer-centric innovations, such as digital leasing platforms and enhanced security measures, position it for sustained profitability.

Despite the inherent challenges of the REIT structure, including high payout ratios and leverage, EXR’s positive net equity and strong market position mitigate risks. For investors seeking exposure to the self-storage sector, EXR offers a compelling mix of growth potential and income generation, reinforced by its undervalued stock price and strategic market positioning.

Extra Space Storage Inc. (NYSE:EXR) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held EXR at the end of the third quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of EXR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EXR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.