GOOD
Gladstone Commercial Corporation
$12.68
Real Estate Investment Trust
85%
P/FFO × Diversified REIT Multiple
Strong
·
Conviction
Undervalued
Trading 48.1% below fair value
You pay
$12.68
Bear
$20.16
Fair
$24.42
Bull
$28.66
Bear
$20.16
+59.0%
$1.60 FFO × 18x
Fair
$24.42
+92.6%
$1.60 FFO × 22x
Bull
$28.66
+126.0%
$1.60 FFO × 26x
Key Value Driver
FFO/share ($1.60) × diversified P/FFO multiple
Implied Market Multiple
7.9x
Summary
Our base-case estimate uses P/FFO × Diversified REIT Multiple. We then blend that result with the average analyst price target of $14.00 from 14 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $24.42 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: $7.45 (72% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $14.00 (from 14 analysts). Our estimate is 93% 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