Apple Hospitality REIT (APLE) stock is in focus after the company refinanced its main unsecured credit facility, lifted total borrowing capacity to about $1.3b, and pushed key debt maturities further out.

Set against this refinancing news, Apple Hospitality REIT’s share price has climbed 24.78% over the past 90 days and the year-to-date share price return of 39.47% points to strong recent momentum, while the 1-year total shareholder return of 48.30% and 5-year total shareholder return of 53.95% show that income and reinvested dividends have been meaningful parts of the story.

If you are looking beyond Apple Hospitality REIT for other ideas in income focused and asset heavy sectors, it can be worth scanning 18 top founder-led companies

After a refinancing that leaves Apple Hospitality REIT with more flexibility and a share price that has already run hard, the focus now shifts to valuation. The key question is whether the current numbers still leave enough potential upside to compensate for the risks.

Most Popular Narrative: 3.3% Overvalued

The most followed valuation narrative for Apple Hospitality REIT sets fair value at $16.28, slightly below the last close of $16.82, and leans on a detailed earnings and cash flow roadmap.

Analysts are assuming Apple Hospitality REIT's revenue will grow by 2.2% annually over the next 3 years. In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 26.6x on those 2029 earnings, up from 23.4x today.

Want to see what kind of revenue path and margin profile this implies for Apple Hospitality REIT? The narrative focuses on the set of growth assumptions used and the valuation multiple applied to potential future earnings. This raises the question of which specific forecasts have the largest impact on that $16.28 fair value.

Result: Fair Value of $16.28 (OVERVALUED)

However, Apple Hospitality REIT could still surprise this consensus if limited new hotel supply in its core markets, along with disciplined asset recycling, continues to support occupancy and margins.

Another View Using Cash Flows

The analyst narrative sees Apple Hospitality REIT as about 3.3% overvalued at $16.28 per share, yet our DCF model points in the opposite direction. Based on projected future cash flows, the SWS DCF model estimates fair value at $20.66, which implies the stock trades at an 18.6% discount. Which story do you think better fits your own assumptions on growth and risk?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Apple Hospitality REIT 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 49 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

If this mixed picture on Apple Hospitality REIT has you undecided, now is a good time to review the numbers yourself and pressure test the key assumptions. To round out your view, take a close look at the 1 key reward and 2 important warning signs

Looking for more investment ideas beyond Apple Hospitality REIT?

Do not stop with Apple Hospitality REIT. Use the Simply Wall St screener to spot other opportunities that fit your style before the next move passes you by.

• Start with dependable compounding potential by checking companies that prioritize shareholder income in the 8 dividend fortresses
• Hunt for quality at a sensible price by scanning the 49 high quality undervalued stocks that may line up better with your return targets.
• Limit unpleasant surprises by focusing on companies with sturdier finances using the solid balance sheet and fundamentals stocks screener (48 results)

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.