ARI
Apollo Commercial Real Estate Finance, Inc.
$6.63
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 71.5% below fair value
You pay
$6.63
Bear
$19.17
Fair
$23.27
Bull
$27.38
Bear
$19.17
+189.1%
$1.05 FFO × 18x
Fair
$23.27
+251.0%
$1.05 FFO × 22x
Bull
$27.38
+313.0%
$1.05 FFO × 26x
Adjust Assumptions
22.1x
$
Key Value Driver
FFO/share ($1.05) × default P/FFO multiple
Implied Market Multiple
6.3x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (13 analysts)
$12.00
Divergence from AlphaVal
94%
Summary
At $1.05 FFO/share with a 22x default REIT multiple, the base-case value is $23.27 per share. Dividend yield: 120.7%.
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 120.7% 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 94% 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