CBL & Associates Properties (CBL) has completed refinancing for Fayette Mall in Lexington, Kentucky, replacing a $98.6 million loan with a $97.5 million five-year non-recourse CMBS facility at an approximate 7.25% fixed rate.

The refinancing news lands after a strong run in the stock, with a 30 day share price return of 7.63%, a 90 day gain of 21.73% and a 1 year total shareholder return of 92.43%, suggesting momentum has been building as investors reassess both cash flow and risk.

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With CBL & Associates now carrying a higher fixed rate but gaining about $5.0 million in extra cash flow and trading at an intrinsic discount of roughly 9%, you have to ask: is there still a buying opportunity here, or is the market already pricing in future growth?

Preferred P/E of 10.2x: Is It Justified?

On a P/E of 10.2x and a last close of $44.14, CBL & Associates Properties screens as cheaper than both the wider US market and the Retail REITs peer group, even though it trades about 9% below an internal fair value estimate of $48.48.

The P/E ratio compares the current share price to earnings per share and is a quick way to see how much investors are paying for each dollar of earnings. For a retail focused REIT with $578.4m in revenue, $133.9m in net income and a history of one off items in recent results, the market may be using the multiple to weigh up how repeatable current earnings really are.

There is a tension here. The stock looks inexpensive relative to both peers and the broader market, yet the estimated fair P/E is 8.2x and interest costs are not well covered by earnings. That combination suggests the market could be pricing in some of the forecast earnings decline and the impact of higher debt costs, even as recent 1 year and 3 year shareholder returns have been strong compared to the Retail REITs industry and the US market.

Against the US Retail REITs industry average P/E of 24.2x and a peer group average of 33.2x, CBL & Associates is trading on a sharply lower multiple that points to a discount. However, compared with the estimated fair P/E of 8.2x, the current 10.2x implies investors are already paying a premium to where the SWS fair ratio suggests the market could settle if expectations cool.

Result: Price-to-Earnings of 10.2x (ABOUT RIGHT)

However, there are still clear watchpoints here, including net income growth running at a 91.53% decline and interest costs that are not comfortably covered by earnings.

Another View: Cash Flows Point To Undervaluation

While the 10.2x P/E hints at a mixed picture, the SWS DCF model points in a different direction, with CBL & Associates Properties trading about 9% below an estimated fair value of $48.48. That gap suggests the market is not fully aligning price with projected cash flows yet.

For a closer look at how this cash flow view is built, and where the key sensitivities sit, Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CBL & Associates Properties for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 44 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With a mix of risks and rewards in view, this story is not one to ignore. See the full picture for yourself by reviewing the 2 key rewards and 3 important warning signs.

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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.