Is Essential Properties Realty Trust (EPRT) Attractive After Recent Mixed Share Price Performance?

• Investors may be wondering if Essential Properties Realty Trust is good value at around US$29.91, or if the recent price leaves little upside on the table.
• The stock has had mixed returns, with a 0.8% gain over the last 7 days but a 3.5% decline over 30 days. Over longer periods it has returned 41.3% over 3 years and 80.4% over 5 years.
• Recent attention on Essential Properties Realty Trust has focused on its position in the net lease real estate space and how investors view income focused REITs compared with other income options. Commentary has also highlighted how its portfolio and tenant mix fit into broader discussions about quality and resilience in commercial property.
• On our valuation checks, Essential Properties Realty Trust currently scores 5 out of 6, which suggests it screens as undervalued on most of the methods we use. We will walk through those methods next and also point to a more holistic way to think about valuation at the end of this article.

Find out why Essential Properties Realty Trust's -1.6% return over the last year is lagging behind its peers.

Approach 1: Essential Properties Realty Trust Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business could be worth today by projecting its future adjusted funds from operations and then discounting those cash flows back to the present.

For Essential Properties Realty Trust, the model uses a 2 stage Free Cash Flow to Equity approach based on adjusted funds from operations. The latest twelve month free cash flow is $307.9 million. Analysts supply forecasts for several years, and Simply Wall St then extrapolates further. In this case, projected free cash flow reaches $753.4 million by 2030, with interim years such as 2026 and 2027 estimated at $442.5 million and $510.0 million respectively, before being discounted back to today.

Adding these discounted cash flows together gives an estimated intrinsic value of about $93.27 per share. Compared with the recent share price of about $29.91, the model implies the stock trades at a 67.9% discount to this intrinsic estimate, which screens as significantly undervalued on this method.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Essential Properties Realty Trust is undervalued by 67.9%. Track this in your watchlist or portfolio, or discover 885 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Essential Properties Realty Trust.

Approach 2: Essential Properties Realty Trust Price vs Earnings

For a profitable company like Essential Properties Realty Trust, the P/E ratio is a useful way to gauge how much you are paying for each dollar of earnings. Investors usually accept a higher P/E if they expect stronger growth or see lower risk, and a lower P/E if they expect slower growth or higher risk.

Essential Properties Realty Trust currently trades on a P/E of about 24.7x. That sits above the broader REITs industry average of around 16.0x, but below the peer group average of roughly 32.5x. On its own, that mix of comparisons does not clearly tell you if the shares are cheap or expensive.

Simply Wall St’s Fair Ratio tries to answer that by estimating what a reasonable P/E would be, given the company’s earnings growth profile, industry, profit margins, market cap and risk characteristics. This tends to be more tailored than a simple peer or industry comparison, because it folds several business specific factors into a single number.

For Essential Properties Realty Trust, the Fair Ratio is 34.0x versus the current 24.7x P/E, which suggests the shares screen as undervalued on this approach.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1449 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Essential Properties Realty Trust Narrative

Earlier we mentioned that there is an even better way to understand valuation, and that is through Narratives. Narratives let you tell a clear story about Essential Properties Realty Trust by linking your view of its e commerce resistant properties, tenant mix and risks to a set of revenue, earnings and margin forecasts that roll up into a Fair Value you can compare with today’s price. All of this sits inside Simply Wall St’s Community page, where Narratives are updated when fresh news or earnings arrive. You can quickly see how other investors, from those who think the company’s focus on long leases and secondary markets supports a Fair Value near US$40.00 to those who are more cautious and sit closer to US$33.00, are using the same data to reach very different conclusions about whether the stock looks attractive, extended or somewhere in between.

Do you think there's more to the story for Essential Properties Realty Trust? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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