TRADE INSTRUCTIONS
Date: May 11, 2017
Name: Jernigan Capital
Symbol: JCAP (NYSE)
Type: Open
Limit: Buy below $23

TRADE TARGETS
Holding Period: 3 months
Target Return: 13.1%
Annualized Return: 52.4%
Target Price: $26
Stop Loss Level: $20

COMPANY DESCRIPTION
Jernigan Capital, Inc. is a commercial real estate investment trust (REIT) that provides capital to private developers, owners, and operators of self-storage facilities. It generates long-term returns on development property investments through a fixed rate of interest on its invested capital together with an interest in the positive cash flows of the self-storage development from operations, sales and/or refinancings on properties in Orlando, Atlanta, Tampa, Chicago, Miami, New Orleans, Newark, Nashville, and Sacramento. Link to company website.

TRADE RATIONALE
Jernigan Capital is the kind of company our Rapid Profits Matrix loves because, (1) most investors have never heard of it, (2) it is a “balance sheet company” that our model is particularly adept at evaluating, and (3) it operates in a niche market that trades independent of the overall stock market.

Also, since JCAP is a small-cap stock ($200 million) it is not closely followed, so it can surprise the market with exceptional results as it did last week when it released its first-quarter earnings report that revealed EPS at triple what the four analysts who follow the company had estimated (21 cents vs. 7 cents).

The company also provided forward guidance estimating EPS of 31 – 42 cents for the current quarter. That equates to at least a $25 share price at an earnings multiple of 8 times earnings at the low end of the range, and as high as $37 at the high end of the range.

Of course, since JCAP is a REIT earnings aren’t as important as cash flow, but on that count it also appears undervalued.  The company has not increased its quarterly dividend since it went public two years ago, which now equates to an annual yield of 6.2%. I expect to see the dividend payment increased in July when the company reports its next set of quarterly numbers, in which case that should be all it takes to push the stock above our target price.

Note: JCAP is not optionable.