DRH
DiamondRock Hospitality Company
$10.71
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 35.4% below fair value
You pay
$10.71
Bear
$13.71
Fair
$16.59
Bull
$19.46
Bear
$13.71
+28.1%
$1.05 FFO × 18x
Fair
$16.59
+54.9%
$1.05 FFO × 22x
Bull
$19.46
+81.7%
$1.05 FFO × 26x
Key Value Driver
FFO/share ($1.05) × default P/FFO multiple
Implied Market Multiple
10.2x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $10.62 from 28 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $16.59 per share.
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-based valuation: $7.83 (58% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $10.62 (from 28 analysts). Our estimate is 75% 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