Is Easterly Government Properties (DEA) Pricing Reflect Its Conflicting DCF And P/E Signals?

• If you are wondering whether Easterly Government Properties is fairly priced or offering value right now, this article will walk you through what the numbers actually say.
• The stock last closed at US$23.79, with a 30 day return of 6.3% and an 11.6% return year to date, set against a 3.1% decline over the past year and a 23.7% and 37.1% decline over the past 3 and 5 years respectively.
• Recent coverage of Easterly Government Properties has focused on its position as a real estate investment trust concentrating on U.S. government leased properties, and how this tenant profile can influence investor sentiment during different market conditions. This backdrop helps frame the recent share price moves as investors weigh income stability against broader sector trends.
• On our framework Easterly Government Properties has a valuation score of 2 out of 6, and next we will look at what traditional valuation tools say about that score, before finishing with a more complete way to think about the company’s value.

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

Approach 1: Easterly Government Properties Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes the cash Easterly Government Properties is expected to generate in the future, then discounts those cash flows back to today to estimate what the business might be worth in total.

In this approach, the model uses Adjusted Funds From Operations as a proxy for free cash flow to equity. The latest twelve month free cash flow is reported at $123.989 million. Analysts have provided explicit estimates through 2030, with projected free cash flow of $137.446 million in that year. Beyond the analyst horizon, Simply Wall St extrapolates further cash flows using its own assumptions to complete the 2 stage model.

Adding all discounted cash flows together gives an estimated intrinsic value of US$48.05 per share. Compared with the recent share price of US$23.79, the DCF output implies the stock is about 50.5% undervalued on this specific cash flow framework.

This is a single valuation lens. On these numbers, Easterly Government Properties screens as cheap relative to the cash flows embedded in this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Easterly Government Properties is undervalued by 50.5%. Track this in your watchlist or portfolio, or discover 1 more high quality undervalued stocks.

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

Approach 2: Easterly Government Properties Price vs Earnings

For profitable companies, the P/E ratio is a straightforward way to see how much you are paying for each dollar of current earnings. It links the share price directly to the bottom line, which is usually what matters most to equity holders.

What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually argue for a lower one.

Easterly Government Properties currently trades on a P/E of 82.73x. That sits above the Office REITs industry average P/E of 21.07x and above the peer group average of 47.78x. Simply Wall St’s Fair Ratio for the stock is 37.63x. The Fair Ratio is a proprietary estimate of what the P/E might be given Easterly Government Properties earnings growth profile, industry, profit margins, market cap and risk factors. Because it blends these company specific inputs, it can give you a more tailored view than a simple comparison with peers or the sector average.

Set against this Fair Ratio, the current P/E suggests the shares are trading at a higher level than that model would indicate.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Easterly Government Properties 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 own story about Easterly Government Properties, tied to a financial forecast and a fair value, that you can build and share on Simply Wall St’s Community page. You can then compare your narrative against the current share price to decide whether the price looks attractive or stretched, and see it update automatically as new news or earnings arrive. For example, one investor might use the analyst consensus assumptions and a fair value of about US$24.08. Another investor, who is more optimistic about long term demand for secure government leased properties and the company’s pipeline, might set a higher fair value. A third investor, who is more cautious about capital costs and government space optimization, might set a lower figure. All of these investors would be using the same easy tool, but with different views.

Do you think there's more to the story for Easterly Government Properties? 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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