What is PLD's Intrinsic value?

Prologis Inc (PLD) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, Prologis Inc's estimated intrinsic value ranges from $135.43 to $217.73 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $217.73 +109.3%
Discounted Cash Flow (5Y) $135.43 +30.2%
Dividend Discount Model (Multi-Stage) $166.89 +60.4%
Dividend Discount Model (Stable) $198.18 +90.5%

Is Prologis Inc (PLD) undervalued or overvalued?

With the current market price at $104.04, 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 Prologis Inc's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

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 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.47 0.68
Cost of equity 6.0% 8.7%
Cost of debt 4.0% 5.1%
Tax rate 4.8% 5.6%
Debt/Equity ratio 0.32 0.32
After-tax WACC 5.5% 7.7%

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: 6.6% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $8,202 (FY12-2024) to $19,811 (FY12-2034)
  • Net profit margin expansion from 48% to 54%
  • Capital expenditures maintained at approximately 90% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $135 $157,256M 89.1%
10-Year Growth $218 $233,626M 81.7%
5-Year EBITDA $201 $217,687M 92.1%
10-Year EBITDA $254 $267,567M 84.0%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 96.8%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.4%
  • Long-term growth rate: 4.0%
  • Fair value: $166.89 (60.4% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.7% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $50 to $347
  • Selected fair value: $198.18 (90.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $96542M
Enterprise Value $128133M
Trailing P/E 25.82
Forward P/E 22.09
Trailing EV/EBITDA 15.80
Current Dividend Yield 374.82%
Dividend Growth Rate (5Y) 19.98%
Debt-to-Equity Ratio 0.32

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) 33% $65.32
Discounted Cash Flow (5Y) 28% $33.86
Dividend Discount Model (Multi-Stage) 22% $33.38
Dividend Discount Model (Stable) 17% $29.73
Weighted Average 100% $180.31

Investment Conclusion

Based on our comprehensive valuation analysis, Prologis Inc's weighted average intrinsic value is $180.31, which is approximately 73.3% above the current market price of $104.04.

Key investment considerations:

  • Strong projected earnings growth (48% to 54% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 19.98%

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