TWO
Two Harbors Investment Corp.
$12.18
Real Estate Investment Trust
85%
P/FFO × Default REIT Multiple
Moderate
·
Conviction
Fair Value
Trading 15.3% below fair value
You pay
$12.18
Bear
$11.84
Fair
$14.38
Bull
$16.91
Bear
$11.84
-2.8%
$0.85 FFO × 14x
Fair
$14.38
+18.0%
$0.85 FFO × 17x
Bull
$16.91
+38.9%
$0.85 FFO × 20x
Adjust Assumptions
17.0x
$
Key Value Driver
FFO/share ($0.85) × default P/FFO multiple
Implied Market Multiple
14.4x
Analyst Consensus (External Reference)
Never blended into the bear/base/bull estimates above.
Average Target (22 analysts)
$13.00
Divergence from AlphaVal
11%
Summary
At $0.85 FFO/share with a 17x default REIT multiple, the base-case value is $14.38 per share. Dividend yield: 11.2%.
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 11.2% is unusually high — make sure the company generates enough cash to keep paying it.
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