INN
Summit Hotel Properties, Inc.
$5.59
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 70.1% below fair value
You pay
$5.59
Bear
$15.44
Fair
$18.71
Bull
$21.97
Bear
$15.44
+176.3%
$1.31 FFO × 18x
Fair
$18.71
+234.7%
$1.31 FFO × 22x
Bull
$21.97
+293.1%
$1.31 FFO × 26x
Key Value Driver
FFO/share ($1.31) × default P/FFO multiple
Implied Market Multiple
4.3x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $5.50 from 14 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $18.71 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 5.7% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $5.96 (73% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $5.50 (from 14 analysts). Our estimate is 300% 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