Simon Property Group has delivered a very strong 129.7% return over the past three years, and current valuation checks still point to shares trading at a discount to their intrinsic value estimate based on a Discounted Cash Flow (DCF) approach and market multiples.

• The 129.7% three year return suggests investors have already priced in a much stronger business than in 2021, so any valuation upside now matters more than ever.
• Releasing former Saks Fifth Avenue space at materially higher market rents can support expectations for future cash flows, while any setback in filling remaining vacancies or pressure on retail tenants may limit how far valuation can stretch.
• On Simply Wall St’s broader checks, Simon Property Group screens as undervalued in 5 of 6 tests, and you can see the detailed scorecard on this valuation page.

The key question for investors is whether Simon Property Group’s current share price of US$218.29 still leaves enough margin between the market value and the intrinsic value estimate to compensate for the risks.

Is Simon Property Group a Bargain on Cash Flow?

The Discounted Cash Flow (DCF) model here uses adjusted funds from operations to estimate what Simon Property Group may be worth based on its cash generation. On the latest twelve month numbers, Simon Property Group produced about $4.0b of free cash flow, and the model assumes these cash flows keep growing rather than shrinking. That stream of projected cash flows points to an intrinsic value of about $299 per share in US$, which is higher than the current $218.29 share price.

This implies the stock screens as roughly 26.9% undervalued on this DCF view. Because Simon Property Group is re-leasing former Saks Fifth Avenue space at much higher rents, the market may be factoring in some of that uplift already, yet the DCF still suggests more value in the underlying cash flows than the current price reflects.

On this cash flow based view, Simon Property Group stock appears undervalued compared with the current market price.

Our Discounted Cash Flow (DCF) analysis suggests Simon Property Group is undervalued by 26.9%. Track this in your watchlist or portfolio, or discover 48 more high quality undervalued stocks.

Is Simon Property Group a Bargain on Earnings?

P/E is often a useful yardstick for Simon Property Group because it links the current share price directly to reported earnings. On this measure, Simon Property Group trades on a P/E of about 15.3x. That is below the Retail REITs industry average of about 31.5x and also below the peer average of roughly 31.0x. So, on a simple comparison, the stock is priced at a lower earnings multiple than many similar REITs.

A more tailored check that looks at Simon Property Group’s growth profile, margins, size and risk suggests a fair P/E of about 23.3x. Against that benchmark, the current 15.3x multiple is lower, which indicates that the stock is changing hands at a discount to what this model implies. For investors weighing the earlier cash flow work against market based signals, this earnings multiple provides another sign that the current price may not fully reflect the earnings power of the business.

On the P/E test, Simon Property Group stock appears undervalued compared with both its tailored fair multiple and typical Retail REIT peers.

The Simon Property Group Narrative: What Would Justify Today's Price?

Simply Wall St Narratives for Simon Property Group pick up where the valuation work leaves off. They spell out which assumptions on growth, margins and earnings would need to hold for the stock to be worth materially more or less than today’s price. Each narrative ties Simon Property Group's potential catalysts and risks to a particular view of fair value, so you can track over time which version of events appears closer to reality on the Community page.

Share a Narrative on Simon Property Group in the Simply Wall St community and provide a clear, number-driven view on whether re-leasing the former Saks space at higher rents truly supports today’s valuation. This is a chance to set out the key drivers you think matter most and then track how that thesis holds up as new results and rental updates arrive.

Do you think there's more to the story for Simon Property Group? Head over to our Community to see what others are saying!

The Bottom Line

For Simon Property Group, both the Discounted Cash Flow (DCF) intrinsic value estimate and the earnings multiple checks point in the same direction, which is that the stock still screens as undervalued. The crux now is whether the company can keep translating its leasing progress, including re-leasing higher rent space, into durable cash flows that support that intrinsic value view.

The key debate is whether the current discount reflects an opportunity for patient investors or an ongoing caution about execution and tenant health. Your view on those leasing and occupancy outcomes is likely to decide how attractive Simon Property Group looks from here.

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.