STWD
Starwood Property Trust, Inc.
$17.29
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Undervalued
Trading 34.0% below fair value
You pay
$17.29
Bear
$21.85
Fair
$26.21
Bull
$30.58
Bear
$21.85
+26.3%
$1.33 FFO × 16x
Fair
$26.21
+51.6%
$1.33 FFO × 19x
Bull
$30.58
+76.9%
$1.33 FFO × 23x
Key Value Driver
FFO/share ($1.33) × default P/FFO multiple
Implied Market Multiple
13.0x
Summary
Our base-case estimate uses P/FFO × Default REIT Multiple. We then blend that result with the average analyst price target of $19.00 from 21 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $26.21 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 11.1% is unusually high — make sure the company generates enough cash to keep paying it.
Dividend-based valuation: $35.78 (25% above our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
Wall Street's average price target is $19.00 (from 21 analysts). Our estimate is 51% 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