RLJ
RLJ Lodging Trust
$9.58
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 61.6% below fair value
You pay
$9.58
Bear
$20.54
Fair
$24.94
Bull
$29.34
Bear
$20.54
+114.4%
$1.41 FFO × 18x
Fair
$24.94
+160.3%
$1.41 FFO × 22x
Bull
$29.34
+206.3%
$1.41 FFO × 26x
Key Value Driver
FFO/share ($1.41) × default P/FFO multiple
Implied Market Multiple
6.8x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $6.00 from 18 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $24.94 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 6.3% is unusually high — make sure the company generates enough cash to keep paying it.
Wall Street's average price target is $6.00 (from 18 analysts). Our estimate is 421% 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