IVR
Invesco Mortgage Capital Inc.
$8.10
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 51.2% below fair value
You pay
$8.10
Bear
$13.72
Fair
$16.59
Bull
$19.46
Bear
$13.72
+69.4%
$1.42 FFO × 14x
Fair
$16.59
+104.8%
$1.42 FFO × 17x
Bull
$19.46
+140.2%
$1.42 FFO × 20x
Key Value Driver
FFO/share ($1.42) × default P/FFO multiple
Implied Market Multiple
5.7x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $7.50 from 20 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $16.59 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 5.9% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $8.95 (54% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $7.50 (from 20 analysts). Our estimate is 162% 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