PMT
PennyMac Mortgage Investment Trust
$10.50
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 61.5% below fair value
You pay
$10.50
Bear
$22.49
Fair
$27.31
Bull
$32.13
Bear
$22.49
+114.2%
$1.47 FFO × 18x
Fair
$27.31
+160.1%
$1.47 FFO × 22x
Bull
$32.13
+206.0%
$1.47 FFO × 26x
Key Value Driver
FFO/share ($1.47) × default P/FFO multiple
Implied Market Multiple
7.2x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $12.00 from 26 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $27.31 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 15.2% is unusually high — make sure the company generates enough cash to keep paying it.
Wall Street's average price target is $12.00 (from 26 analysts). Our estimate is 170% 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