What is STOR's Intrinsic value?

STORE Capital Corp (STOR) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, STORE Capital Corp's estimated intrinsic value ranges from $15.15 to $58.13 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $15.15 -53.0%
Dividend Discount Model (Multi-Stage) $31.65 -1.7%
Dividend Discount Model (Stable) $58.13 +80.5%

Is STORE Capital Corp (STOR) undervalued or overvalued?

With the current market price at $32.21, 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 STORE Capital Corp'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 0.46 0.8
Cost of equity 6.0% 9.3%
Cost of debt 4.5% 6.1%
Tax rate 0.3% 0.3%
Debt/Equity ratio 0.48 0.48
After-tax WACC 5.5% 8.3%

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: 6.9% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $783 (FY12-2021) to $2,055 (FY12-2031)
  • Net profit margin expansion from 34% to 35%
  • Capital expenditures maintained at approximately 220% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $(1,234) $1,701M 90.6%
10-Year Growth $15 $9,083M 86.1%
5-Year EBITDA $89 $30,012M 99.5%
10-Year EBITDA $117 $37,972M 96.7%

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: 133.3%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.7%
  • Long-term growth rate: 4.0%
  • Fair value: $31.65 (-1.7% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.3% (Low) to 6.0% (High)
  • Long-term growth rate: 3.0% (Low) to 5.0% (High)
  • Fair value range: $13 to $104
  • Selected fair value: $58.13 (80.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $9105M
Enterprise Value $13906M
Trailing P/E 28.35
Forward P/E 33.21
Trailing EV/EBITDA 14.80
Current Dividend Yield 470.04%
Dividend Growth Rate (5Y) 17.35%
Debt-to-Equity Ratio 0.48

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% $4.54
Dividend Discount Model (Multi-Stage) 31% $6.33
Dividend Discount Model (Stable) 23% $8.72
Weighted Average 100% $30.14

Investment Conclusion

Based on our comprehensive valuation analysis, STORE Capital Corp's weighted average intrinsic value is $30.14, which is approximately 6.4% below the current market price of $32.21.

Key investment considerations:

  • Strong projected earnings growth (34% to 35% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 17.35%

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