- Is VICI Properties becoming an overlooked bargain, or is the market accurately valuing its casino and entertainment assets?
- Despite a recent 3.4% increase in the stock price, it remains around $28.66 year-to-date, showing only slight gains over three years and a stark contrast to its 43.8% rise over the past five years.
- Recent discussions highlight VICI’s significant role as a landlord on the Las Vegas Strip and its ongoing deals in experiential real estate. This reinforces the idea that its tenants are tied into long-term leases linked to inflation. Simultaneously, changing opinions on interest rates and income-focused REITs have led investors to question whether these stable cash flows justify a higher valuation or continued discounts.
- Using our evaluation framework, VICI received a 6/6 valuation score, indicating it appears undervalued based on all our assessments. Next, we will explore what this means through various valuation methods, followed by a practical approach to understand what the market might be overlooking.
Approach 1: Discounted Cash Flow (DCF) Analysis for VICI Properties
A DCF model estimates the present value of a company by projecting its future adjusted funds from operations and discounting these cash flows back to present value.
VICI’s latest twelve-month free cash flow stands at approximately $2.37 billion. Projections suggest this could grow to around $3.97 billion by 2035, with intermediate estimates for 2028 around $2.98 billion. Near-term forecasts depend on analyst estimates, while our extrapolated figures use conservative growth assumptions for the later years.
When we compile and discount these estimated cash flows using a two-stage model, we arrive at an intrinsic value of about $54.80 per share. Compared to the current price of about $28.66, this suggests that VICI may be trading at a 47.7% discount to its DCF value, indicating conservative market pricing for its future cash flows.
Conclusion: UNDERVALUED
Approach 2: VICI Properties Price vs Earnings
The price-to-earnings (PE) ratio offers insights into how much investors are willing to pay for each dollar of profit for companies like VICI. A higher PE usually indicates stronger growth expectations, while a lower PE could signal risks or present a bargain if the outlook is solid.
Currently, VICI’s PE is around 11x, significantly lower than the industry average of about 16.6x and the broader peer group average of roughly 55.6x. Simply Wall St’s Fair Ratio calculation suggests that VICI should have a PE of approximately 31.6x based on its earnings growth, risk profile, and market capitalizations, indicating it deserves a higher multiple than what is reflected by the current market price, rendering it attractively priced.
Conclusion: UNDERVALUED
Enhance Your Decision-Making: Craft Your VICI Properties Narrative
We’ve introduced a more effective way to understand valuation through the Narratives tool on Simply Wall St. This allows you to connect your perspective about a company with the underlying numbers, forming financial forecasts and fair values that simplify buy or sell decisions as market conditions change. For instance, one investor might project a higher fair value based on robust experiential demand, while another might adopt a cautious stance, leading to varied assessments of VICI’s value.
Curious about others’ perspectives on VICI Properties? Check out our Community to see what others think!
