DCF Studio

    INVH · NYQ · Real Estate

    Invitation Homes Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 8.72

    Market price

    USD 26.91

    Implied upside

    -67.6%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedReported capital expenditure averages 8.91% of revenue against depreciation of 27.46%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 27.46% of revenue so the forecast is not handed free growth. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD 8.72-67.6%
    Exit multiple
    USD 32.41+20.5%
    Market price
    USD 26.91

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 2.9bnUSD 3.1bnUSD 3.3bnUSD 3.6bnUSD 3.8bn+6.8%
    EBITUSD 829.2mUSD 885.9mUSD 946.5mUSD 1.0bnUSD 1.1bn+6.8%
    NOPATUSD 829.2mUSD 885.9mUSD 946.5mUSD 1.0bnUSD 1.1bn+6.8%
    Add depreciation & amortisationUSD 808.3mUSD 863.5mUSD 922.6mUSD 985.6mUSD 1.1bn+6.8%
    Less capital expenditureUSD -800.6mUSD -855.3mUSD -913.8mUSD -976.3mUSD -1.0bn+6.8%
    Less increase in working capitalUSD 20.9mUSD 22.3mUSD 23.8mUSD 25.5mUSD 27.2m-6.8%
    Free cashflow to firmUSD 857.8mUSD 916.4mUSD 979.1mUSD 1.0bnUSD 1.1bn+6.8%
    Discount factor0.96140.88860.82130.75910.7017-
    Present valueUSD 824.7mUSD 814.3mUSD 804.1mUSD 794.1mUSD 784.1m-1.3%
    Present Value Of The ForecastUSD 4.0bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.887Reported 0.831, pulled toward 1.0 (Blume)
    Cost of equity9.88%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 15.9bn65.5% of capital
    Total debtUSD 8.4bn34.5% of capital, book value as a proxy
    Tax rate0.0%Effective, capped at statutory
    WACC8.19%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 8.72

    70% of EV

    Forecast FCFF, final year
    USD 1.1bn
    Capex at depreciation, working capital in reinvestment
    USD 1.1bn
    Less reinvestment at g/ROIC (30.5% of NOPAT)
    USD -332.8m
    Capitalised
    USD 757.6m
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    USD 13.6bn
    Terminal value, discounted
    USD 9.6bn
    Enterprise value
    USD 13.6bn
    Less net debt
    USD 8.3bn
    Equity value
    USD 5.3bn

    Exit at 16.1x EBITDA

    Value per shareUSD 32.41

    86% of EV

    Terminal value, undiscounted
    USD 34.4bn
    Terminal value, discounted
    USD 24.1bn
    Enterprise value
    USD 28.1bn
    Less net debt
    USD 8.3bn
    Equity value
    USD 19.9bn

    Spread between methods: 115%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.19%15.6615.7715.8815.9916.10
    7.19%11.6211.7111.8011.8911.98
    8.19%8.568.648.728.798.87
    9.19%6.186.246.316.376.44
    10.19%4.264.314.374.434.48

    Outlined: this model. Green text: above today's price of 26.91. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year6.8%21.8%+15.0pp
    EBIT margin28.4%52.2%+23.7pp
    Discount rate8.2%4.5%-3.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.