Is It Time To Reassess Agree Realty (ADC) After Recent Share Price Weakness

• If you are wondering whether Agree Realty is offering good value at around US$70.49 per share, it helps to step back and look at what the current price might be implying about its future.
• The stock has seen a 3.2% decline over the last 7 days and a 4.6% decline over the last 30 days, while its 1 year return sits at 4.9% and its 5 year return at 39.0%.
• Recent coverage of Agree Realty has focused on it as a US real estate stock. This can draw attention whenever broader sentiment toward income focused property names shifts. These kinds of moves can influence how investors think about the trade off between its yield potential and perceived risk.
• Right now, Agree Realty has a valuation score of 2 out of 6. We will look at what different valuation methods say about that score, then finish by talking through a more complete way to think about value that goes beyond the headline numbers.

Agree Realty scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Agree Realty Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model tries to estimate what a company is worth today by projecting its future adjusted funds from operations, then discounting those cash flows back to the present.

For Agree Realty, 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 about $422.8 million. Analyst inputs and extrapolated estimates are used to project free cash flow up to 2035, with expected free cash flow of $957.4 million in 2030. Simply Wall St only has direct analyst estimates for the earlier years, while later years are extrapolated from those inputs.

Adding up all discounted cash flows gives an estimated intrinsic value of about $178.61 per share. Compared with the recent share price of around $70.49, the model indicates the stock trades at a 60.5% discount to this estimate. This suggests that, on this DCF view, Agree Realty may be materially undervalued.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Agree Realty is undervalued by 60.5%. Track this in your watchlist or portfolio, or discover 877 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 Agree Realty.

Approach 2: Agree Realty Price vs Earnings

For a profitable company like Agree Realty, the P/E ratio is a useful way to relate what you are paying per share to the earnings that the business is currently generating. Investors usually accept a higher P/E when they expect stronger earnings growth or see less risk, and a lower P/E when growth is expected to be slower or risks are viewed as higher.

Agree Realty currently trades on a P/E of 43.56x. That sits above the Retail REITs industry average of 27.37x and also above the peer group average of 25.31x. On those simple comparisons, the shares look expensive relative to many similar names.

Simply Wall St’s Fair Ratio for Agree Realty is 34.75x. This is a proprietary estimate of what a more appropriate P/E might be after considering the company’s earnings growth profile, profit margins, risk factors, industry and market capitalization. Because it is tailored to the company, the Fair Ratio can give you more context than a plain comparison with broad industry or peer averages. With the actual P/E of 43.56x above the Fair Ratio of 34.75x, this approach points to the shares looking overvalued on earnings.

Result: OVERVALUED

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 Agree Realty Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simply your story about Agree Realty, tied to concrete numbers like your fair value, revenue, earnings and margin assumptions, and then compared with today’s share price to help you decide whether you see the stock as attractive or not.

Do you think there's more to the story for Agree Realty? 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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