REIT Valuation (P/FFO): How Investors Value REITs
REIT valuation explained: why investors use P/FFO, what FFO is, and how to compare REITs using fundamentals and valuation discipline.
Why REITs use FFO
REIT accounting includes large non-cash depreciation, which can distort earnings. Funds From Operations (FFO) is a cash-flow-like metric that many investors prefer for REIT valuation.
What is P/FFO?
P/FFO compares the stock price to FFO per share. Investors compare P/FFO to growth, leverage, and property quality to judge valuation.
Practical REIT checks
- Leverage and debt maturity schedule
- Occupancy and rent trends
- FFO/AFFO growth and payout coverage
Screen and compare
Use tools to compare valuation and fundamentals across companies and sectors.
FAQs
What is the difference between FFO and AFFO?▼
AFFO adjusts FFO for recurring capital expenditures and other items to better approximate distributable cash flow.
Is P/FFO similar to P/E?▼
Yes conceptually, but FFO is more appropriate than earnings for many REITs.
Related
Intrinsic Investor is for education and research only. Not financial advice.