DCF Studio

    MAA · NYQ · Real Estate

    Mid-America Apartment Communities, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 46.68

    Market price

    USD 118.93

    Implied upside

    -60.8%

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

    Value Per Share

    Perpetuity growth
    USD 46.68-60.8%
    Exit multiple
    USD 127.45+7.2%
    Market price
    USD 118.93

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn1bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 2.3bnUSD 2.3bnUSD 2.4bnUSD 2.5bnUSD 2.6bn+3.0%
    EBITUSD 689.7mUSD 710.6mUSD 732.2mUSD 754.4mUSD 777.2m+3.0%
    NOPATUSD 683.1mUSD 703.8mUSD 725.1mUSD 747.1mUSD 769.7m+3.0%
    Add depreciation & amortisationUSD 615.9mUSD 634.5mUSD 653.8mUSD 673.6mUSD 694.0m+3.0%
    Less capital expenditureUSD -350.3mUSD -360.9mUSD -371.9mUSD -383.1mUSD -394.8m+3.0%
    Less increase in working capitalUSD -12.7mUSD -13.1mUSD -13.5mUSD -13.9mUSD -14.3m+3.0%
    Free cashflow to firmUSD 935.9mUSD 964.3mUSD 993.5mUSD 1.0bnUSD 1.1bn+3.0%
    Discount factor0.96140.88850.82120.75890.7014-
    Present valueUSD 899.8mUSD 856.8mUSD 815.8mUSD 776.8mUSD 739.7m-4.8%
    Present Value Of The ForecastUSD 4.1bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.809Reported 0.715, pulled toward 1.0 (Blume)
    Cost of equity9.45%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 14.1bn72.3% of capital
    Total debtUSD 5.4bn27.7% of capital, book value as a proxy
    Tax rate1.0%Effective, capped at statutory
    WACC8.20%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 46.68

    62% of EV

    Forecast FCFF, final year
    USD 1.1bn
    Capex at depreciation, working capital in reinvestment
    USD 769.7m
    Less reinvestment at g/ROIC (30.5% of NOPAT)
    USD -234.7m
    Capitalised
    USD 535.1m
    ROIC (WACC floor)
    8.2%
    Terminal value, undiscounted
    USD 9.6bn
    Terminal value, discounted
    USD 6.7bn
    Enterprise value
    USD 10.8bn
    Less net debt
    USD 5.4bn
    Equity value
    USD 5.5bn

    Exit at 15.7x EBITDA

    Value per shareUSD 127.45

    80% of EV

    Terminal value, undiscounted
    USD 23.1bn
    Terminal value, discounted
    USD 16.2bn
    Enterprise value
    USD 20.3bn
    Less net debt
    USD 5.4bn
    Equity value
    USD 14.9bn

    Spread between methods: 93%.

    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%
    6.20%72.7373.1473.5473.9574.35
    7.20%57.6057.9358.2758.6058.93
    8.20%46.1146.3946.6846.9647.24
    9.20%37.0937.3337.5737.8138.05
    10.20%29.8130.0230.2330.4330.64

    Outlined: this model. Green text: above today's price of 118.93. 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 year3.0%18.3%+15.2pp
    EBIT margin30.3%56.7%+26.4pp
    Discount rate8.2%5.0%-3.2pp
    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.