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If you are wondering whether Alexandria Real Estate Equities is offering good value right now, it helps to step back and look carefully at what the current share price actually reflects.
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The stock last closed at US$57.26, after returns of 7.5% over the past week and 21.9% over the past month, although the one year and three year returns sit at 39.1% and 56.8% declines.
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Recent coverage has focused on how the wider market is reassessing specialized real estate such as life science campuses. This affects sentiment toward Alexandria Real Estate Equities as a key player in that space. There has also been closer attention on listed real estate more broadly as investors weigh income potential against interest rate expectations, which helps frame the recent share price moves.
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On our checks, the company scores a 5 out of 6 valuation rating. This sets up a closer look at traditional valuation tools alongside a different way of thinking about value that we will come to at the end of the article.
A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting its future adjusted funds from operations and then discounting those cash flows back to today in dollar terms.
For Alexandria Real Estate Equities, the model used is a 2 Stage Free Cash Flow to Equity approach based on adjusted funds from operations. The latest twelve month free cash flow is reported at $1.63b. Analyst inputs run through 2028, with Simply Wall St extrapolating further, including a projected free cash flow of $1.16b in 2035. Each future cash flow, such as the $849.21m estimate for 2026 or the $913.05m for 2028, is discounted back to reflect the time value of money and risk.
Aggregating these discounted values gives an estimated intrinsic value of US$81.47 per share, compared with the recent share price of US$57.26. That gap implies a 29.7% discount, so on this model the shares screen as undervalued.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Alexandria Real Estate Equities is undervalued by 29.7%. Track this in your watchlist or portfolio, or discover 868 more undervalued stocks based on cash flows.
For a real estate business where earnings can be affected by non cash items, the P/S ratio is a practical way to compare what investors are paying for each dollar of revenue. It keeps the focus on the top line, which is often more stable for property backed companies.
In general, higher growth expectations or lower perceived risk can justify a higher P/S multiple, while slower growth or higher risk tends to line up with a lower “normal” range. So it helps to look at where Alexandria Real Estate Equities sits relative to both its sector and what its fundamentals might support.
Right now, the stock trades on a P/S of 3.24x. That is below the Health Care REITs industry average P/S of 6.52x and also below the peer group average of 5.92x. Simply Wall St’s Fair Ratio for the company is 3.97x, which is its in house estimate of an appropriate P/S once factors like growth, profit margins, industry, market cap and risk are all considered.
This Fair Ratio is often more useful than a simple peer or industry comparison because it adjusts for the company’s specific profile rather than assuming all REITs deserve the same multiple. With the actual P/S at 3.24x versus a Fair Ratio of 3.97x, the shares currently screen as undervalued on this metric.
Result: UNDERVALUED
P/S ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which let you set out your story for Alexandria Real Estate Equities by linking your view on its future revenue, earnings, margins and fair value to a clear financial forecast that you can compare with today’s price. On Simply Wall St’s Community page you can see how different Narratives range from more optimistic views, such as a fair value closer to US$96.42, to more cautious ones near US$58.33. All of these update automatically as new news or earnings arrive, so you can quickly see when your view suggests the stock is trading above or below what you think it is worth.
Do you think there’s more to the story for Alexandria Real Estate Equities? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ARE.
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