Assessing Apollo Commercial Real Estate Finance (ARI) Valuation After Recent Share Price Firming

Apollo Commercial Real Estate Finance (ARI) has drawn fresh attention after its recent share move, with a 1-day return of about 0.6% and roughly 1.8% over the past week.

See our latest analysis for Apollo Commercial Real Estate Finance.

With the share price at $10.15, Apollo Commercial Real Estate Finance has paired its recent positive daily move with a 2.94% year to date share price return. Its 1 year total shareholder return of 24.66% and 5 year total shareholder return of 53.30% point to momentum that has built gradually rather than spiking on a single event.

If this kind of income focused real estate play is on your radar, it could also be a good moment to widen your view and look at fast growing stocks with high insider ownership.

With ARI trading at $10.15 and only a small gap to the average analyst price target, the key question is whether the current yield and performance already reflect its prospects or if the market is leaving an opportunity on the table.

Price to earnings of 11.5x: Is it justified?

At a last close of $10.15, Apollo Commercial Real Estate Finance is trading on a P/E of 11.5x, which screens as good value compared with both peers and the wider US market.

The P/E multiple compares the current share price to earnings per share, so for a mortgage REIT like ARI it gives you a quick read on how the market is pricing its current profit stream. A lower P/E than peers can suggest investors are pricing in more cautious expectations for future earnings, or that they have not fully repriced the stock after recent profitability.

Here, ARI’s P/E of 11.5x sits below the US market average of 19.4x, and also below the US Mortgage REITs industry average of 13.2x and the peer average of 13.4x. The estimated fair P/E of 12.7x implies the current multiple is under that level, a gap the market could potentially close if sentiment and earnings delivery stay aligned.

Explore the SWS fair ratio for Apollo Commercial Real Estate Finance

Result: Price-to-earnings of 11.5x (UNDERVALUED).

However, you also need to weigh risks such as annual revenue contraction of 9.8% and the reliance on commercial real estate credit conditions for loan performance.

Find out about the key risks to this Apollo Commercial Real Estate Finance narrative.

Build Your Own Apollo Commercial Real Estate Finance Narrative

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A great starting point for your Apollo Commercial Real Estate Finance research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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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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