Why Apollo Commercial Real Estate Finance is on investors’ radar

Apollo Commercial Real Estate Finance (ARI) has drawn fresh attention after a recent move in its share price, with the stock last closing at US$11.16 and showing positive returns over the past year.

With a market value of about US$1.5b and a business focused on commercial real estate debt as a REIT, investors are weighing how its recent share performance lines up against reported revenue of US$268.36 million and net income of US$111.913 million.

The 13.18% year to date share price return and 7.31% 1 month share price return suggest momentum has been building, while the 47.74% 1 year total shareholder return highlights how reinvested dividends have added to recent gains.

If Apollo Commercial Real Estate Finance has you thinking about income and stability, it could be a good moment to see which other companies screen well for resilience and fundamentals via our solid balance sheet and fundamentals stocks screener (42 results)

With ARI trading at US$11.16, sitting close to an average analyst price target of US$11.63 and carrying a high value score of 1, it is worth asking whether there is still upside or if the market is already pricing in future growth.

Most Popular Narrative: 5.8% Overvalued

The most followed valuation narrative puts Apollo Commercial Real Estate Finance's fair value at $10.55, slightly below the recent $11.16 share price, and builds a case around detailed earnings and margin assumptions.

The analysts have a consensus price target of $10.55 for Apollo Commercial Real Estate Finance based on their expectations of its future earnings growth, profit margins and other risk factors. In order for you to agree with the analysts, you would need to believe that by 2028, revenues will be $185.3 million, earnings will come to $165.8 million, and it would be trading on a PE ratio of 11.4x, assuming you use a discount rate of 8.8%.

The fair value story leans heavily on shrinking revenue, sharply higher margins and a future earnings multiple below the sector. It raises the question of which assumptions matter most here.

Result: Fair Value of $10.55 (OVERVALUED)

However, continued strength in European property markets and more efficient use of leverage could lift earnings power beyond these assumptions and challenge the view that the shares are 5.8% overvalued.

Next Steps

If the mixed signals so far leave you unsure, take a closer look at both sides of the story and weigh the company's risks against its potential rewards through our 2 key rewards and 3 important warning signs

Looking for more investment ideas?

Do not stop at one company when there are so many other opportunities worth comparing. Use the tools available and give yourself a broader set of choices.

• Target dependable income and potential stability by checking out companies in the 11 dividend fortresses that might complement a yield focused portfolio.
• Spot potential value candidates early by scanning the screener containing 23 high quality undiscovered gems and see which businesses have solid fundamentals yet limited attention.
• Prioritise capital preservation by reviewing the 70 resilient stocks with low risk scores and compare businesses that score well on resilience and financial strength.

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.