DRH
DiamondRock Hospitality Company
$13.42
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 27.7% below fair value
You pay
$13.42
Bear
$15.35
Fair
$18.57
Bull
$21.78
Bear
$15.35
+14.4%
$1.05 FFO × 18x
Fair
$18.57
+38.4%
$1.05 FFO × 22x
Bull
$21.78
+62.3%
$1.05 FFO × 26x
Adjust Assumptions
22.1x
$
Key Value Driver
FFO/share ($1.05) × default P/FFO multiple
Implied Market Multiple
12.8x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (29 analysts)
$13.54
Divergence from AlphaVal
37%
Summary
At $1.05 FFO/share with a 22x default REIT multiple, the base-case value is $18.57 per share. Dividend yield: 3.4%. DDM cross-check: $7.83.
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 $13.54 (from 29 analysts). Our estimate is 37% 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