ARI
Apollo Commercial Real Estate Finance, Inc.
$6.59
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 72.2% below fair value
You pay
$6.59
Bear
$19.52
Fair
$23.71
Bull
$27.89
Bear
$19.52
+196.3%
$1.07 FFO × 18x
Fair
$23.71
+259.7%
$1.07 FFO × 22x
Bull
$27.89
+323.2%
$1.07 FFO × 26x
Adjust Assumptions
22.1x
$
Key Value Driver
FFO/share ($1.07) × default P/FFO multiple
Implied Market Multiple
6.1x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (13 analysts)
$12.00
Divergence from AlphaVal
98%
Summary
At $1.07 FFO/share with a 22x default REIT multiple, the base-case value is $23.71 per share. Dividend yield: 179.8%.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend yield of 179.8% is unusually high — make sure the company generates enough cash to keep paying it.
Wall Street's average price target is $12.00 (from 13 analysts). Our estimate is 98% above the consensus -- consider that gap carefully.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify