O
Realty Income Corporation
$55.36
Real Estate Investment Trust
85%
P/FFO × Retail REIT Multiple
Mild
·
Conviction
Fair Value
Trading 1.8% below fair value
You pay
$55.36
Bear
$45.34
Fair
$56.38
Bull
$67.42
Bear
$45.34
-18.1%
$3.79 FFO × 16x
Fair
$56.38
+1.8%
$3.79 FFO × 20x
Bull
$67.42
+21.8%
$3.79 FFO × 23x
Adjust Assumptions
19.5x
$
Key Value Driver
FFO/share ($3.79) × retail P/FFO multiple
Implied Market Multiple
14.6x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (34 analysts)
$65.28
Divergence from AlphaVal
14%
Summary
At $3.79 FFO/share with a 20x retail REIT multiple, the base-case value is $56.38 per share. Dividend yield: 2.0%. DDM cross-check: $15.65.
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.
The 2.0% yield is low for a real estate company — investors are paying up because they expect above-average growth.
Dividend-based valuation: $15.65 (72% below our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
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