Is Simon Property a Good Value Stock at Current Multiples?


Aug. 9 2018, Updated 7:30 a.m. ET

Price-to-FFO ratio

The best ratio to evaluate a REIT like Simon Property (SPG) is the price-to-FFO (price-to-funds from operations) multiple. Simon Property’s TTM (trailing-12-month) price-to-FFO ratio is 15.0x. Competitors Equity Residential (EQR), GGP (GGP), and Kimco Realty (KIM) have TTM price-to-FFO ratios of 21.3x, 14.1x, and 11.0x, respectively, which means Simon Property is trading at a discount to Equity Residential but at a premium to GGP and Kimco Realty.

On the basis of Wall Street’s 2018 FFO expectations, Simon Property is trading at a premium to Kimco Realty but at a discount to Equity Residential and GGP. Simon Property, Kimco Realty, Equity Residential, and GGP have forward price-to-FFO ratios of 14.8x, 11.7x, 20.7x, and 18.7x, respectively.

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Analyst ratings

Wall Street remains bullish on Simon Property with a “buy” recommendation. Over the last two months, analysts’ ratings have remained unchanged. Six out of 19 analysts have given a “strong buy” recommendation, seven gave a “buy” rating, and the remaining six have a “hold” rating on the stock. Analysts have a target price of $185.00 for Simon Property, implying a 3.8% rise from its current price of $178.27. Last year, the stock had lost 3.3% of its value.

While competitor GGP, has the most bullish view from analysts with a “buy,” Equity Residential and Kimco Realty have “hold” ratings. Two of the ten analysts that cover GGP gave the stock a “strong buy” rating, three provided a “buy,” while the remaining five have a “hold” recommendation on GGP. The target price of $22.7 represents a 5.5% upside from the current price of $21.52.

Out of 22 analysts covering Equity Residential stock, two gave the stock a “strong buy” recommendation, two gave it a “buy” rating, 16 gave it a “hold” rating, and the remaining two provided a “sell” rating. The target price of $68 signifies a 1.6% upside from the current market price of $66.91.

Kimco Realty received a “strong buy” recommendation from one out of 20 analysts covering the stock. Five gave the stock a “buy” recommendation, while 12 gave it a “hold” rating. The stock got two “sell” recommendations. Analysts gave it a target price of $17.14.

Simon Property makes up ~8% of the iShares Cohen & Steers REIT ETF (ICF).


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