What is AFIN's Intrinsic value?

American Finance Trust Inc (AFIN) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, American Finance Trust Inc's estimated intrinsic value ranges from $0.67 to $0.67 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $0.67 -91.9%

Is American Finance Trust Inc (AFIN) undervalued or overvalued?

With the current market price at $8.23, the stock appears to be significantly overvalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate American Finance Trust Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 1 1.16
Cost of equity 7.4% 10.2%
Cost of debt 4.8% 13.1%
Tax rate 27.0% 27.0%
Debt/Equity ratio 1.74 1.74
After-tax WACC 4.9% 9.8%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $305 (FY12-2020) to $574 (FY12-2030)
  • Net profit margin expansion from -10% to -3%
  • Capital expenditures maintained at approximately 77% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $1,547M 83.9%
10-Year Growth $1 $1,757M 72.0%
5-Year EBITDA $18 $3,880M 93.6%
10-Year EBITDA $18 $3,858M 87.2%

Key Financial Metrics

Metric Value
Market Capitalization $1016M
Enterprise Value $2691M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 12.95
Current Dividend Yield 889.30%
Dividend Growth Rate (5Y) 0.73%
Debt-to-Equity Ratio 1.74

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 100% $0.20
Weighted Average 100% $0.67

Investment Conclusion

Based on our comprehensive valuation analysis, American Finance Trust Inc's weighted average intrinsic value is $0.67, which is approximately 91.9% below the current market price of $8.23.

Key investment considerations:

  • Strong projected earnings growth (-10% to -3% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 0.73%

Given these factors, we believe American Finance Trust Inc is currently significantly overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.