A price-to-FFO (funds from operations) ratio is considered the best multiple to compare REITs and finding out which stock is overvalued or undervalued. The implication of the multiple is the same as the PE ratio. With a TTM (trailing-12-month) price-to-FFO multiple of 20.9x, Extra Space Storage (EXR) currently trades at a premium to its peers. Its peers Public Storage (PSA), CubeSmart (CUBE), and Life Storage (LSI) have TTM price-to-FFO multiples of 20.8x, 18.7x, and 10.1x, respectively.
Considering Wall Street’s 2018 FFO expectations, Extra Space is trading at a premium compared to CubeSmart and Life Storage and at a discount to Public Storage. The forward price-to-FFO ratios for Extra Space, CubeSmart, Life Storage, and Public Storage are 20.2x, 18.7x, 10.1x, and 20.6x, respectively.
Wall Street ratings
As of August 8, two of the 14 analysts tracking Extra Space stock have rated it a “strong buy,” two have rated it a “buy,” and ten have rated it a “hold.” Wall Street’s target price of $98.54 represents a gain of 5.2% from the current market price of $93.65.
Of the 13 analysts covering CubeSmart, two have recommended a “buy,” and ten have recommended a “hold.” Analysts’ target price of $32.17 represents a 5% increase from the current price of $30.65.
For Public Storage, only one of the 15 analysts covering the stock has given it a “strong buy” recommendation. Nine have recommended a “hold,” four have recommended a “sell,” and one has rated it a “strong sell.” With a target price of $206.92, Wall Street forecasts a 4.6% decline from the current market price of $216.85.
Of the 11 analysts covering Life Storage, ten have recommended a “hold,” and one has recommended a “sell” for the stock. The target price of $91.60 shows Wall Street’s forecast of a 6.3% decrease from the current market price of $97.75.
Extra Space and its peers together make up ~15.2% of the NuShares Short-Term REIT ETF (NURE).