Price-to-FFO (funds from operations) is considered the best valuation multiple for comparing REITs. The multiple’s implication is similar to the PE ratio. With a TTM (trailing-12-month) price-to-FFO multiple of 20.1x, Equity Residential (EQR) currently trades at a premium to its peers. Its competitors AvalonBay Communities (AVB), Camden Property (CPT), and UDR (UDR) have TTM price-to-FFO multiples of 19.8x, 19.7x, and 19.6x, respectively.
Equity Residential is also trading at a premium to its peers on the basis of Wall Street’s 2018 FFO expectations. The forward price-to-FFO ratios for AvalonBay Communities, Camden Property, and UDR are 20x, 19.2x, 19.1x, and 19.2x, respectively.
Wall Street ratings
Over the last two months, analysts have maintained their “hold” recommendations for Equity Residential. As of July 26, two of the 22 analysts have provided a “strong buy” rating, two have given it a “buy,” 16 have recommended a “hold,” and two have rated it a “sell.” Wall Street analysts have given it a target price of $67.16, which represents a gain of 4.1% from the current market price of 64.54.
UDR, one of Equity Residential’s competitors, has a similar “hold” recommendation, while AvalonBay Communities and Camden Property Trust have mostly “buy” recommendations.
Five of the 23 analysts covering AvalonBay Communities have given it a “strong buy” recommendation, four have given it a “buy,” and 13 have given it a “hold.” Analysts’ target price of $184.50 represents a 7.1% increase from the current price of $172.27.
For Camden Property Trust, four of the 20 analysts tracking the stock have given it a “strong buy” recommendation, six have rated it a “buy,” and the remaining ten have given it a “hold.” With a target price of $93.05, Wall Street has forecast a 2.7% rise from the current market price of $90.59.
UDR got a “strong buy” recommendation from three of the 20 analysts covering the stock. One gave it a “buy” rating, and 16 recommended a “hold.” The target price of $38.59 is a 4.2% increase from the current market price of $37.02.
Equity Residential and its above peers make up ~19.6% of the NuShares Short-Term REIT ETF (NURE).