Empire State Realty (ESRT:NYS) Fundamental Valuation Report


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Empire State Realty $17.04 (USD) Close Price as of 07/03/2018

Based on the analysis conducted in this report, Empire State Realty, (ESRT:NYS) is found to be  Undervalued.

Company Empire State Realty
Symbol:Exchange ESRT:NYS
Industry Real Estate:REIT-Diversified
Close Price/Date $17.04 (USD) 07/03/2018
Weighted Average Valuation $19.52 (USD)
Summary ESRT:NYS is found to be  Undervalued by 14.5% using the 3 valuation models shown below.
Valuation Models Used Analyst Consensus: $22.00 (USD)
(in order of importance) Adjusted Book Value: $17.24 (USD)
Comparables: $16.61 (USD)
Valuation Methods Analysis This company is:
Cash Flow Basis: Overvalued on a Cash Flow Valuation basis
Comparable Company Basis: Fairly valued on a Comparable Valuation basis
Asset Basis: Fairly valued on an Asset Valuation basis

Valuation Details

Empire State Realty Valuations

Summary chart

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for ESRT:NYS

Using a discounted cash flow model we generated an intrinsic value of $5.95 (USD) for ESRT:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

ESRT:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $5.95 1% 5% 1% 5%
WACC (or Ke) 7.81 $8.83 $4.03
Terminal Growth Rate 2.80 $4.12 $8.69
Tax Rate 0.05 $6.82 $5.08
Cash Flow 425,524,739 $4.73 $7.17
Capital Expenditures -193,405,000 $5.46 $6.44
Long Term Debt 1,615,833,000 $6.22 $5.68

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $16.61 (USD) for ESRT:NYS. We also generated a valuation of $20.06 (USD) using other metrics and comparables.
The comparable companies were PotlatchDeltic (PCH:NAS), PS Business Parks (PSB:NYS), Urban Edge Props (UE:NYS), VEREIT (VER:NYS) and W.P. Carey (WPC:NYS)

Company ESRT:NYS End Date Value
Earnings/Share $0.39 (USD)
Book Value/Share $3.87 (USD)
Sales/Share $2.39 (USD)
Cash Flow/Share $0.64 (USD)
EBITDA/Share $1.20 (USD)
Price Based on Comps Adjustment Factor (%)
$12.00 (USD) 24.4
$20.09 (USD) 0.0
$14.68 (USD) 37.7
$8.07 (USD) 0.0
$13.19 (USD) 49.9
ESRT:NYS Ratios Used Average Values PCH:NAS PSB:NYS UE:NYS VER:NYS WPC:NYS
43.69 PE Ratio 30.78 24.24 34.74 36.92 0.00 27.22
4.40 PB Ratio 5.19 15.89 4.26 2.88 0.86 2.05
7.13 PS Ratio 6.14 3.09 7.81 6.55 5.44 7.81
26.53 PCF Ratio 12.56 12.90 11.57 16.89 8.58 12.84
17.87 EV to EBITDA 15.78 20.75 14.44 17.46 11.75 14.48

Multiples

Using a multiples approach we generated a valuation of  $20.30 (USD) for ESRT:NYS

Company ESRT:NYS End Date Value
Earnings/Share $0.39 (USD)
Book Value/Share $3.87 (USD)
Sales/Share $2.39 (USD)
Cash Flow/Share $0.64 (USD)
EBITDA/Share $1.20 (USD)
Price Based on Comps Adjustment Factor
$23.48 (USD) 0
$17.16 (USD) 0
$18.67 (USD) 0
$16.84 (USD) 0
$25.34 (USD) 0
Ratios Ratio Average
PE Ratio 60.19
PB Ratio 4.43
PS Ratio 7.81
PCF Ratio 26.22
EV to EBITDA 21.20

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  ESRT:NYS for the last 5 years was  4.43

We ran the Adjusted Book Value for  ESRT:NYS and generated a book value of  $3.89 (USD)
By multiplying these we get an adjusted valuation of  $17.24 (USD)

Analyst Data

In the Stockcalc database there are 1 analysts that provide a valuation for ESRT:NYS. The 1 analysts have a concensus valuation for ESRT:NYS for 2018 of $22.00 (USD).

ESRT:NYS Empire State Realty

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 1 0 4.0000 Outperform 2018-3-7

Current Price: not available

Analyst Consensus
USD Millions 2018
Mean EPS 0.23
# EPS Analysts 1
Mean Revenue 777.70
# Revenue Analysts 1
Mean Target Price 22.00
Mean Cash Flow 1.03
Mean EBITDA 373.80
Mean Net Income 68.40
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate 11.33
Mean Capital Expenditure 181.10

Company Overview (ESRT:NYS USD)

Price 17.04
Range 16.99 – 17.16
52 week 16.75 – 21.63
Open 17.06
Vol / Avg. 981051/859773
Mkt cap 5.12B
P/E 43.69
Div/yield 0.42/0.02
EPS 0.39
Shares 300.42M
Beta 1.10
Summary chart

Detailed Company Description

Empire State Realty Trust Inc owns, operates, acquires and repositions properties such as Empire State Building, One Grand Central Place in Manhattan and the greater New York metropolitan area. It operates in two segments, Real Estate and Observatory.

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.
The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).
The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.
Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.
With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.
If we have Analyst coverage for the company we use the consensus target price here.

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