Is Arbor Realty Trust (ABR) Now Attractive After A 35.5% One-Year Share Price Slide

• If you are wondering whether Arbor Realty Trust's current share price reflects its underlying worth, this article walks through the numbers so you can form your own view on value.
• The stock recently closed at US$7.69, with returns of a 0.9% decline over 7 days, a 13.8% decline over 30 days, a 3.3% decline year to date, a 35.5% decline over 1 year, a 21.4% decline over 3 years, and a 7.3% decline over 5 years.
• Recent market attention on real estate and income focused stocks has kept Arbor Realty Trust on many investors' watchlists. That context helps explain why some shareholders are reassessing the trade off between its income potential and share price performance.
• Simply Wall St currently gives Arbor Realty Trust a valuation score of 5 out of 6, which reflects how many of its checks flag the stock as undervalued. We will look at how different valuation methods arrive at that view before finishing with a more complete way to think about value.

Find out why Arbor Realty Trust's -35.5% return over the last year is lagging behind its peers.

Approach 1: Arbor Realty Trust Excess Returns Analysis

The Excess Returns model looks at how much profit a company generates over and above the return that shareholders require, then adds the present value of those excess profits to today’s book value per share.

For Arbor Realty Trust, the starting point is its book value of US$12.08 per share and a stable book value estimate of US$11.74 per share, based on weighted future book value estimates from 4 analysts. The model assumes a stable earnings power of US$1.32 per share, sourced from the median return on equity over the past 5 years, and a cost of equity of US$1.09 per share. That gap, an excess return of US$0.22 per share, represents the value created beyond the shareholder return requirement.

By projecting these excess returns forward and discounting them back, Simply Wall St’s Excess Returns model arrives at an intrinsic value of about US$15.41 per share. Compared to the recent share price of US$7.69, this indicates the stock is 50.1% undervalued based on this approach.

Result: UNDERVALUED

Our Excess Returns analysis suggests Arbor Realty Trust is undervalued by 50.1%. 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 Arbor Realty Trust.

Approach 2: Arbor Realty Trust Price vs Earnings

For a profitable company, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. It ties the share price directly to current profit, which many income focused investors watch closely.

What counts as a "normal" P/E depends on what the market expects for growth and how it views risk. Higher growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk often lines up with a lower multiple.

Arbor Realty Trust currently trades on a P/E of 9.86x. That is below the Mortgage REITs industry average of 12.28x and the peer average of 12.93x. Simply Wall St’s Fair Ratio for Arbor Realty Trust is 13.37x, which is its proprietary view of what a reasonable P/E might be after accounting for factors such as earnings growth profile, profit margins, industry, market cap and company specific risks.

The Fair Ratio is more tailored than a simple peer or industry comparison because it adjusts for those business characteristics rather than assuming all Mortgage REITs deserve the same multiple. With the current P/E of 9.86x sitting below the Fair Ratio of 13.37x, this approach indicates that the shares appear undervalued on earnings.

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 Arbor Realty Trust Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simple stories you create about Arbor Realty Trust that connect your assumptions on future revenue, earnings and margins to a financial forecast, a fair value, and finally a comparison between that fair value and the current price. This all happens within an easy tool on Simply Wall St's Community page that updates as new news or earnings arrive and lets different investors express very different views. For example, one user might build a bullish Arbor Realty Trust Narrative consistent with a fair value near the highest analyst target of US$15.00, while another builds a more cautious Narrative closer to US$10.50, reflecting how the same data can support different decisions on whether the current price looks attractive or not.

Do you think there's more to the story for Arbor 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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