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

NorthWest Healthcare Properties REIT (NWH.UN.TO) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, NorthWest Healthcare Properties REIT's estimated intrinsic value ranges from $3.52 to $7.88 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $7.88 +64.2%
Discounted Cash Flow (5Y) $6.77 +41.0%
Earnings Power Value $3.52 -26.6%

Is NorthWest Healthcare Properties REIT (NWH.UN.TO) undervalued or overvalued?

With the current market price at $4.80, the stock appears to be significantly undervalued.

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 NorthWest Healthcare Properties 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 3.2% 3.7%
Equity market risk premium 5.1% 6.1%
Adjusted beta 0.68 0.84
Cost of equity 6.6% 9.3%
Cost of debt 4.7% 14.9%
Tax rate 9.5% 14.8%
Debt/Equity ratio 2.54 2.54
After-tax WACC 4.9% 11.8%

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: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 8.4% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $462 (FY12-2024) to $626 (FY12-2034)
  • Net profit margin expansion from -69% to -69%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $7 $4,642M 69.7%
10-Year Growth $8 $4,919M 49.7%
5-Year EBITDA $5 $4,280M 67.1%
10-Year EBITDA $7 $4,647M 46.8%

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 $267M
Discount Rate (WACC) 11.8% - 4.9%
Enterprise Value $2,274M - $5,401M
Net Debt $2,963M
Equity Value $(689)M - $2,438M
Outstanding Shares 248M
Fair Value $(3) - $10
Selected Fair Value $3.52

Key Financial Metrics

Metric Value
Market Capitalization $1191M
Enterprise Value $4154M
Trailing P/E 0.00
Forward P/E 0.00
Trailing EV/EBITDA 14.50
Current Dividend Yield 659.64%
Dividend Growth Rate (5Y) -11.85%
Debt-to-Equity Ratio 2.54

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% $2.36
Discounted Cash Flow (5Y) 38% $1.69
Earnings Power Value 15% $0.35
Weighted Average 100% $6.78

Investment Conclusion

Based on our comprehensive valuation analysis, NorthWest Healthcare Properties REIT's weighted average intrinsic value is $6.78, which is approximately 41.3% above the current market price of $4.80.

Key investment considerations:

  • Strong projected earnings growth (-69% to -69% margin)
  • Consistent cash flow generation

Given these factors, we believe NorthWest Healthcare Properties REIT is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.