DCF Studio

    UDR · NYQ · Real Estate

    UDR, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD -4.55

    Market price

    USD 33.90

    Implied upside

    -113.4%

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

    AdjustedReported capital expenditure averages 16.97% of revenue against depreciation and amortisation of 42.15%. A business cannot depreciate more than it invests indefinitely. Capex has been set to 42.15% of revenue so the forecast is not handed free growth. The accounts do not separate depreciation from amortisation, so the combined charge is used - if a large part of it is amortisation of an acquisition, the reported capex is probably right and this substitution is not. Override it if the reported figure is right.

    Value Per Share

    Perpetuity growth
    USD -4.55-113.4%
    Exit multiple
    USD 34.56+2.0%
    Market price
    USD 33.90

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m157m314mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 1.8bnUSD 1.9bnUSD 1.9bnUSD 2.0bnUSD 2.1bn+4.1%
    EBITUSD 306.9mUSD 319.6mUSD 332.7mUSD 346.4mUSD 360.6m+4.1%
    NOPATUSD 305.7mUSD 318.2mUSD 331.3mUSD 344.9mUSD 359.1m+4.1%
    Add depreciation & amortisationUSD 751.4mUSD 782.3mUSD 814.5mUSD 848.0mUSD 882.8m+4.1%
    Less capital expenditureUSD -751.4mUSD -782.3mUSD -814.5mUSD -848.0mUSD -882.8m+4.1%
    Less increase in working capitalUSD -38.7mUSD -40.3mUSD -42.0mUSD -43.7mUSD -45.5m+4.1%
    Free cashflow to firmUSD 267.0mUSD 277.9mUSD 289.4mUSD 301.3mUSD 313.6m+4.1%
    Discount factor0.96260.89200.82650.76590.7097-
    Present valueUSD 257.0mUSD 247.9mUSD 239.2mUSD 230.7mUSD 222.6m-3.5%
    Present Value Of The ForecastUSD 1.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.789Reported 0.685, pulled toward 1.0 (Blume)
    Cost of equity9.34%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 12.5bn67.5% of capital
    Total debtUSD 6.0bn32.5% of capital, book value as a proxy
    Tax rate0.4%Effective, capped at statutory
    WACC7.92%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 -4.55

    73% of EV

    Forecast FCFF, final year
    USD 313.6m
    Capex at depreciation, working capital in reinvestment
    USD 359.1m
    Less reinvestment at g/ROIC (31.6% of NOPAT)
    USD -113.4m
    Capitalised
    USD 245.8m
    ROIC (WACC floor)
    7.9%
    Terminal value, undiscounted
    USD 4.6bn
    Terminal value, discounted
    USD 3.3bn
    Enterprise value
    USD 4.5bn
    Less net debt
    USD 6.0bn
    Equity value
    USD -1.5bn

    Exit at 18.4x EBITDA

    Value per shareUSD 34.56

    93% of EV

    Terminal value, undiscounted
    USD 22.9bn
    Terminal value, discounted
    USD 16.2bn
    Enterprise value
    USD 17.4bn
    Less net debt
    USD 6.0bn
    Equity value
    USD 11.4bn

    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%
    5.92%0.010.080.160.230.30
    6.92%-2.66-2.60-2.54-2.48-2.42
    7.92%-4.65-4.60-4.55-4.50-4.45
    8.92%-6.19-6.15-6.11-6.07-6.03
    9.92%-7.42-7.38-7.35-7.31-7.28

    Outlined: this model. Green text: above today's price of 33.90. 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 year4.1%44.9%+40.7pp
    EBIT margin17.2%64.2%+46.9pp
    Discount rate7.9%2.8%-5.1pp
    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.