DRH
DiamondRock Hospitality Company
$12.90
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Fair Value
Trading 22.9% below fair value
You pay
$12.90
Bear
$13.82
Fair
$16.72
Bull
$19.61
Bear
$13.82
+7.2%
$1.05 FFO × 18x
Fair
$16.72
+29.6%
$1.05 FFO × 22x
Bull
$19.61
+52.0%
$1.05 FFO × 26x
Key Value Driver
FFO/share ($1.05) × default P/FFO multiple
Implied Market Multiple
12.3x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $11.15 from 29 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $16.72 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 $11.15 (from 29 analysts). Our estimate is 67% 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