What is CUF.UN.TO's Intrinsic value?

Cominar REIT (CUF.UN.TO) Intrinsic Value Analysis

Executive Summary

As of May 29, 2025, Cominar REIT's estimated intrinsic value ranges from $5.85 to $13.21 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $13.21 +12.5%
Discounted Cash Flow (5Y) $10.92 -7.0%
Earnings Power Value $5.85 -50.2%

Is Cominar REIT (CUF.UN.TO) undervalued or overvalued?

With the current market price at $11.74, the stock appears to be fairly valued.

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 Cominar REIT's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Earnings Power Value (EPV): Values the company based on its current earnings power, assuming no growth

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 3.4% 3.9%
Equity market risk premium 4.7% 5.7%
Adjusted beta 1.17 1.26
Cost of equity 8.9% 11.6%
Cost of debt 4.0% 8.2%
Tax rate 0.1% 0.2%
Debt/Equity ratio 1.65 1.65
After-tax WACC 5.8% 9.5%

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: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 7.7% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $661 (FY12-2020) to $914 (FY12-2030)
  • Net profit margin expansion from -50% to -50%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $11 $5,474M 78.8%
10-Year Growth $13 $5,892M 60.5%
5-Year EBITDA $1 $3,729M 68.9%
10-Year EBITDA $5 $4,446M 47.7%

3. Earnings Power Value (EPV)

EPV assesses a company's value based on its current normalized earnings power, assuming no growth.

EPV Component Value
Normalized Earnings $329M
Discount Rate (WACC) 9.5% - 5.8%
Enterprise Value $3,471M - $5,628M
Net Debt $3,482M
Equity Value $(11)M - $2,146M
Outstanding Shares 182M
Fair Value $(0) - $12
Selected Fair Value $5.85

Key Financial Metrics

Metric Value
Market Capitalization $2142M
Enterprise Value $5624M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 10.70
Current Dividend Yield 306.68%
Dividend Growth Rate (5Y) -18.52%
Debt-to-Equity Ratio 1.65

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) 46% $3.96
Discounted Cash Flow (5Y) 38% $2.73
Earnings Power Value 15% $0.59
Weighted Average 100% $11.20

Investment Conclusion

Based on our comprehensive valuation analysis, Cominar REIT's weighted average intrinsic value is $11.20, which is approximately 4.6% below the current market price of $11.74.

Key investment considerations:

  • Strong projected earnings growth (-50% to -50% margin)
  • Consistent cash flow generation

Given these factors, we believe Cominar REIT is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.