STWD
Starwood Property Trust, Inc.
$12.58
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Strong
·
Conviction
Undervalued
Trading 56.2% below fair value
You pay
$12.58
Bear
$23.96
Fair
$28.75
Bull
$33.54
Bear
$23.96
+90.5%
$1.34 FFO × 16x
Fair
$28.75
+128.5%
$1.34 FFO × 19x
Bull
$33.54
+166.6%
$1.34 FFO × 23x
Adjust Assumptions
19.2x
$
Key Value Driver
FFO/share ($1.34) × default P/FFO multiple
Implied Market Multiple
9.4x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (21 analysts)
$20.00
Divergence from AlphaVal
44%
Summary
At $1.34 FFO/share with a 19x default REIT multiple, the base-case value is $28.75 per share. Dividend yield: 15.3%. DDM cross-check: $35.78.
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 15.3% is unusually high — make sure the company generates enough cash to keep paying it.
Wall Street's average price target is $20.00 (from 21 analysts). Our estimate is 44% 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