IVR
Invesco Mortgage Capital Inc.
$7.87
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 53.4% below fair value
You pay
$7.87
Bear
$13.97
Fair
$16.88
Bull
$19.80
Bear
$13.97
+77.5%
$1.41 FFO × 14x
Fair
$16.88
+114.5%
$1.41 FFO × 17x
Bull
$19.80
+151.6%
$1.41 FFO × 20x
Key Value Driver
FFO/share ($1.41) × default P/FFO multiple
Implied Market Multiple
5.6x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $9.00 from 20 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $16.88 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 6.1% 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 $9.00 (from 20 analysts). Our estimate is 117% 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