SVI revenue and earnings normalized this quarter after two exploding years of tailwinds due to COVID and inflation. It is now trading at 24.5x times' EV/EBITDA (historical averages in the last five years range from 24x – 37x). Overall, the recent slowdown is not too concerning given that most storage companies do have a high bar to compare during COVID times. Unlike other public storage names such as PSA, EXR, etc. which pay out the majority of its earnings as dividends, SVI reinvested heavily (and borrowed significantly) back into acquiring properties with attractive cap rates. Overall, we are okay with SVI’s performance and would be okay to add here, however, investors need to monitor the leverage profile of the company as the debt level is high, with the net debt/EBITDA 11.0x. The company has executed its acquisition strategy quite well. That being said, as it gets larger it will likely see slowing growth. We would like to see it pause deals and reduce debt, but it remains interesting for small cap investors, and we think the decline makes it more attractive for those with at least a 3-year timeframe.
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