ORC
Orchid Island Capital, Inc.
$6.76
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 58.9% below fair value
You pay
$6.76
Bear
$13.59
Fair
$16.43
Bull
$19.27
Bear
$13.59
+101.1%
$1.05 FFO × 18x
Fair
$16.43
+143.0%
$1.05 FFO × 22x
Bull
$19.27
+185.1%
$1.05 FFO × 26x
Key Value Driver
FFO/share ($1.05) × default P/FFO multiple
Implied Market Multiple
6.5x
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 5 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $16.43 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 6.5% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $8.20 (56% 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 5 analysts). Our estimate is 149% 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