DX
Dynex Capital, Inc.
$12.72
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 61.4% below fair value
You pay
$12.72
Bear
$27.25
Fair
$32.96
Bull
$38.67
Bear
$27.25
+114.2%
$2.11 FFO × 18x
Fair
$32.96
+159.1%
$2.11 FFO × 22x
Bull
$38.67
+204.0%
$2.11 FFO × 26x
Key Value Driver
FFO/share ($2.11) × default P/FFO multiple
Implied Market Multiple
6.0x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $16.83 from 14 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $32.96 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 yield of 5.3% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $14.72 (60% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $16.83 (from 14 analysts). Our estimate is 120% 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