SHO
Sunstone Hotel Investors, Inc.
$11.22
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Fair Value
Trading 21.5% below fair value
You pay
$11.22
Bear
$11.82
Fair
$14.29
Bull
$16.77
Bear
$11.82
+5.4%
$0.85 FFO × 18x
Fair
$14.29
+27.4%
$0.85 FFO × 22x
Bull
$16.77
+49.5%
$0.85 FFO × 26x
Key Value Driver
FFO/share ($0.85) × default P/FFO multiple
Implied Market Multiple
13.1x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $11.50 from 28 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $14.29 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 $11.50 (from 28 analysts). Our estimate is 32% 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