Is It Time To Reassess Rexford Industrial Realty (REXR) After Recent Share Price Recovery?

• If you are wondering whether Rexford Industrial Realty at around US$36.33 is offering good value today, the key is to look beyond headline returns and focus on what the current price implies.
• The stock has returned 1.1% over the last week and 6.9% over the past month, while year to date it is down 6.9% and sits on a 12.8% gain over the last year, with 3 year and 5 year returns at 25.5% and 23.2% declines respectively.
• Recent coverage has largely centered on how Rexford fits into investor interest in industrial real estate and its role within the sector, which gives context for these mixed return figures. That backdrop has kept attention on whether the current price fairly reflects the risks and opportunities in the shares.
• Our valuation framework currently gives Rexford Industrial Realty a value score of 0 out of 6. Next, we look at how different valuation approaches assess the stock and how a broader way of thinking about valuation can give you an even clearer picture by the end of this article.

Rexford Industrial Realty scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Rexford Industrial Realty Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes Rexford Industrial Realty’s expected adjusted funds from operations in future years and discounts those cash flows back to what they are worth in today’s dollars.

Rexford’s latest twelve month free cash flow sits at about $518.7 million. Based on the current model, projected free cash flow in 2030 is $552.2 million, with interim years shaped by a mix of analyst estimates up to 2030 and then extrapolated figures beyond that. Each of these future cash flows is discounted back using a required return to reflect the risk and the time value of money.

When all those discounted cash flows are added together, the DCF model arrives at an estimated intrinsic value of about US$36.18 per share. Compared with the recent share price of around US$36.33, the model suggests Rexford is roughly 0.4% overvalued, which is a very small difference.

Result: ABOUT RIGHT

Rexford Industrial Realty is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.

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

Approach 2: Rexford Industrial Realty 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 links directly to what matters most to equity investors, the earnings that support dividends and potential reinvestment.

A “normal” or “fair” P/E ratio usually reflects what the market expects for future growth and how risky those earnings are. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth or higher risk tends to point to a lower, more conservative multiple.

Rexford Industrial Realty currently trades on a P/E of about 41.78x. That is above the Industrial REITs industry average of roughly 16.82x and also above the peer group average of about 30.14x. Simply Wall St’s Fair Ratio for Rexford is 32.14x, which is its view of the P/E that would make sense given factors such as earnings growth, industry, profit margins, market cap and risk profile.

The Fair Ratio is more tailored than simple peer or industry comparisons because it folds in these company specific drivers rather than relying only on broad averages. With the current P/E sitting above the 32.14x Fair Ratio, the shares screen as somewhat expensive on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Rexford Industrial Realty Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as your way to attach a clear story about Rexford Industrial Realty to concrete numbers like fair value, future revenue, earnings and margins. Simply Wall St’s Community page gives you an easy tool, used by millions of investors, to set out your view, compare your fair value to the current price to see whether that story points you toward buying, holding or selling, and then have that view update automatically as new news or earnings arrive. This is why one investor might build a Narrative that lines up with the higher US$44 analyst target while another leans toward the lower US$35 target, even though both are working from the same shared data.

Do you think there’s more to the story for Rexford Industrial 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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