SHO
Sunstone Hotel Investors, Inc.
$10.62
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Fair Value
Trading 24.4% below fair value
You pay
$10.62
Bear
$11.61
Fair
$14.04
Bull
$16.48
Bear
$11.61
+9.4%
$0.85 FFO × 18x
Fair
$14.04
+32.2%
$0.85 FFO × 22x
Bull
$16.48
+55.1%
$0.85 FFO × 26x
Key Value Driver
FFO/share ($0.85) × default P/FFO multiple
Implied Market Multiple
12.4x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $10.50 from 28 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $14.04 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-based valuation: $6.71 (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 $10.50 (from 28 analysts). Our estimate is 45% 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