NNN REIT (NNN) has put up another steady set of numbers, with Q3 FY 2025 revenue at US$230.2 million and basic EPS of US$0.51, while trailing twelve month revenue sits at US$906.3 million and basic EPS at US$2.09. The company has seen quarterly revenue move from US$216.8 million in Q2 FY 2024 to US$230.9 million in Q1 FY 2025 and US$226.8 million in Q2 FY 2025. Over the same period, quarterly EPS has ranged between roughly US$0.51 and US$0.58, which sets the stage for investors to focus on how these earnings support income and long term cash generation as margins settle at current levels.

See our full analysis for NNN REIT.

With the headline figures on the table, the next step is to see how these results line up with the prevailing narratives about NNN REIT's growth, income profile and risk trade offs, and where those stories may need updating.

43.1% net margin supports rent focused model

• Over the last 12 months, NNN REIT generated US$391.0 million of net income on US$906.3 million of revenue, which works out to a 43.1% net profit margin compared with 45.6% the prior year.
• Analysts' consensus view is that this kind of high margin business fits with the focus on long term net leases to necessity based, e commerce resistant tenants. However, the slight margin move from 45.6% to 43.1% keeps the bearish narrative about higher operating and real estate expenses in play.
  • Supporters of the bullish side point to 410 tenants across all 50 states and long average lease terms as reasons margins can stay resilient even with that 2.5 percentage point margin change.
  • On the cautious side, critics highlight that management expects certain costs, like net real estate expenses and lease termination related items, to stay elevated, which lines up with the small step down in net margins shown in the trailing 12 month figures.

NNN’s high margin profile looks attractive on paper, but bulls and bears are watching closely to see whether rising costs or tenant issues chip away at that 43.1% net profit margin over time. 🐻 NNN REIT Bear Case

FFO of US$610.5 million underpins the income story

• Funds From Operations over the trailing 12 months sits at US$610.5 million, alongside a 5.57% dividend yield and a trailing basic EPS figure of US$2.09.
• Supporters of the bullish narrative argue that this combination of US$610.5 million in FFO, long leases and necessity focused tenants heavily supports the idea of steady cash flow for dividends. At the same time, the numbers also have to contend with higher financing costs that are already visible in the REIT's funding mix.
  • Consensus commentary points to recent acquisitions at around 7.4% initial cap rates with average lease terms over 17 years as a positive for sustaining FFO, which lines up with the solid FFO base reported here.
  • At the same time, the mention of a 4.6% coupon on recent unsecured notes shows why the interest coverage risk flagged in the data matters for how far that US$610.5 million in FFO can stretch after debt service.

With FFO, dividend yield and tenant mix all in focus, many bulls are asking whether this income engine can keep humming as financing costs stay elevated and acquisition competition remains intense. 🐂 NNN REIT Bull Case

Cheap P/E and DCF fair value gap with interest coverage risk

• NNN trades on a P/E of 20.9x at a share price of US$43.08, which sits below both the US Retail REIT industry average of 27.5x and peer average of 33.8x, and below a DCF fair value of US$78.26 plus an analyst price target of US$44.41.
• Analysts' consensus narrative frames this as a tug of war between attractive valuation markers and the major risk that interest payments are not well covered by earnings. Investors weighing the P/E discount and the gap to DCF fair value against that interest coverage flag are effectively deciding how comfortable they are with the balance sheet supporting ongoing acquisitions and a 5.57% dividend yield.
  • On the supportive side, the current price of US$43.08 is materially below the DCF fair value of US$78.26 and sits slightly under the US$44.41 analyst target, which matches the view that the stock looks inexpensive relative to its modelled cash flows and to peers.
  • On the cautious side, the explicit warning that earnings did not provide strong coverage of interest over the last 12 months means that even a low P/E and wide DCF fair value gap do not remove the financing risk that could limit how investors think about future income and growth.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for NNN REIT on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your NNN REIT research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Explore Alternatives

Interest coverage concerns, a small step down in net margin from 45.6% to 43.1%, and elevated real estate related costs all point to balance sheet pressure.

If those pressure points make you cautious about relying on this income stream, check out our solid balance sheet and fundamentals stocks screener (45 results) to focus on companies where debt and cash support look more robust.

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.