REIT - Residential · NYSE
Current Price
$184.37
Intrinsic Value
Use the calculator below to estimate
Run a full DCF analysis on AvalonBay Communities, Inc. with auto-filled fundamentals, adjustable assumptions, and sensitivity heatmap.
As of December 31, 2020, the Company owned or held a direct or indirect ownership interest in 291 apartment communities containing 86,025 apartment homes in 11 states and the District of Columbia, of which 18 communities were under development and one community was under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California, as well as in the Company's expansion markets consisting of Southeast Florida and Denver, Colorado (the Expansion Markets).
ROIC (TTM)
4.0%
ROE (TTM)
9.7%
FCF Yield
5.89%
Based on trailing twelve-month data, AVB shows a free cash flow per share of N/A and a ROIC of 4.0%, key inputs for stock valuation using the DCF method. The P/FCF ratio of N/A and FCF yield of 5.89% are important context metrics when evaluating AVB's stock valuation relative to peers.
The intrinsic value of AVB depends on assumptions about future growth rate, discount rate (WACC), and terminal value. A DCF model discounts projected free cash flows back to present value — small changes in WACC can shift the estimate by 20% or more, which is why sensitivity analysis is essential.
Whether AVB is undervalued depends on comparing the DCF-derived intrinsic value to the current market price of $184.37. A positive margin of safety (intrinsic value above market price) suggests potential undervaluation, but the degree of confidence depends on the reliability of your growth and discount rate assumptions.
To perform a DCF valuation on AvalonBay Communities, Inc.: (1) Start with the trailing free cash flow per share as the base, (2) project future FCF growth over 5-10 years based on REIT - Residential industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting AVB's risk profile, and (4) add a terminal value for cash flows beyond the projection period.
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For AvalonBay Communities, Inc., this means projecting how much free cash flow the REIT - Residential will produce over the next 5-10 years, then discounting those amounts to today's dollars. AVB's ROIC of 4.0% suggests the company may face challenges generating returns above its cost of capital.
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For AVB, the capital structure and equity risk premium determine WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%.
