• If you are wondering whether VICI Properties is priced fairly right now, you are not alone. Many investors are asking the same question as they weigh income potential against what they are paying per share.
• At a recent share price of US$29.17, the stock has returned 1.1% over the last 7 days, 4.6% over 30 days, 3.6% year to date, 3.6% over 1 year and 38.6% over 5 years, which gives useful context before comparing that price to underlying value.
• Recent attention on VICI Properties has included ongoing discussion of its position in the US real estate space and how its portfolio fits into investor demand for income focused stocks. This backdrop helps explain why some investors are reassessing the balance between its share price, yield and perceived risk.
• Simply Wall St currently gives VICI Properties a valuation score of 6 out of 6. Next, we will look at how different valuation methods arrive at that view, before finishing with a way to think about valuation that goes beyond any single model.

Approach 1: VICI Properties Discounted Cash Flow (DCF) Analysis

A discounted cash flow, or DCF, model estimates what a business might be worth today by projecting its future adjusted funds from operations and then discounting those cash flows back to the present.

For VICI Properties, the model uses a 2 stage Free Cash Flow to Equity approach based on adjusted funds from operations. The latest twelve month free cash flow is about US$2.37b. Analyst and extrapolated projections in this model suggest free cash flow reaching about US$3.98b in 2035, with interim estimates provided for each year in between. Simply Wall St uses analyst inputs through 2028, then extends the trend for the later years.

When all those projected cash flows are discounted back, the model arrives at an estimated intrinsic value of US$55.23 per share. Compared with the recent share price of US$29.17, this implies the stock is 47.2% undervalued according to this DCF output.

For investors who lean heavily on cash flow based valuation, VICI Properties currently screens as materially cheap on this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests VICI Properties is undervalued by 47.2%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Approach 2: VICI Properties Price vs Earnings

For a profitable company like VICI Properties, the P/E ratio is a useful way to think about what you are paying for each dollar of current earnings. It ties the share price directly to reported profit, which many investors already track, and it is easy to compare across similar businesses.

What counts as a reasonable P/E depends in part on how fast earnings are expected to grow and how risky those earnings are. Higher growth or lower perceived risk can justify a higher multiple, while slower growth or higher uncertainty can point to a lower one. VICI Properties currently trades on a P/E of 11.19x, compared with the Specialized REITs industry average of about 16.07x and a peer group average of 67.93x.

Simply Wall St also calculates a proprietary Fair Ratio for VICI Properties of 32.09x. This metric aims to reflect the P/E you might expect given factors such as earnings growth, profit margins, industry, market cap and specific risk characteristics. Because it blends these elements, it can be more tailored than a simple comparison with peers or the broad industry. On this basis, VICI Properties trades below its Fair Ratio, which indicates that the shares may be undervalued on a P/E basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your VICI Properties Narrative

Earlier we mentioned that there is an even better way to think about value. On Simply Wall St that takes the form of Narratives, where you translate your view of VICI Properties into a simple story that connects assumptions for future revenue, earnings, margins and a fair value. You can then compare that to the current price, all within an easy to use tool on the Community page that updates as new earnings or news arrive. Different investors can reasonably land in very different places, such as one Narrative that lines up with a fair value close to the analysts’ latest update of about US$35.13 and another that points to something nearer the most bullish US$44 or the more cautious US$34, depending on how each investor weighs Caesars regional lease risks, experiential real estate demand and funding conditions.

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

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.