The Pacesetter

Newhall Land & Farming Co. Not only does Valencia developer Newhall Land & Farming Co. top this year’s list of the Valley’s most profitable public companies, it has been near the top of the list for the past five years. The company’s return on equity last year came in at 64.7 percent. Yet Wall Street hardly seems to have noticed; the company’s P/E ratio is a low 9.7, a fraction of what hot companies in more popular sectors are trading at. “Newhall is not valued on its earnings,” said Brett Hendrickson, an analyst with B. Riley & Co. “It’s valued on the basis of its breakup value, its assets.” According to Hendrickson, Newhall’s strong earnings come from selling off its real estate holdings, which can’t be sustained over the long term because its assets will ultimately be exhausted. Newhall Land owns more than 20,000 acres in the Santa Clarita Valley. Last year, the company announced it would sell off a $175 million chunk of its commercial real estate portfolio to finance a share-repurchase program. Newhall Land is looking to take advantage of the strong real estate market and the low price of its stock in order to boost the value of outstanding units. The company is sitting on some of the last large pieces of developable land in L.A. County, with more than 30,000 housing units entitled to be developed. And because demand for new homes is growing fast, the company is expected to remain strong for the time being.