VICI Properties stock has drifted lower over the past year even as Simply Wall St's Discounted Cash Flow (DCF) intrinsic value estimate and traditional multiples both point to the shares trading at a discount to their assessed worth.

• Over the past 5 years VICI Properties has delivered a total return of 17.9%, which is positive but not especially strong for a REIT over that timeframe.
• The key support for the valuation is the cash flow profile from long term leases. The main risk is that changes in financing costs or tenant health could weigh on future cash generation.
• VICI Properties screens as undervalued across the broader checks, with an overall score of 6 out of 6 on Simply Wall St's valuation framework.

The issue now is whether the market discount, including an intrinsic value estimate suggesting VICI Properties may be 47.2% undervalued, offers enough margin of safety for investors at around US$27.13 per share.

Does VICI Properties Look Undervalued on Cash Flow?

The Discounted Cash Flow (DCF) model here uses adjusted funds from operations to estimate what VICI Properties might be worth based on its future cash generation.

For the latest twelve months, VICI Properties has reported free cash flow of about $2.53b, and the DCF model assumes these cash flows continue to grow rather than shrink over time. On those assumptions, the model arrives at an estimated intrinsic value of about $51.37 per share, compared with a current share price around $27.13. That gap implies the stock is trading at a 47.2% discount to the modeled value.

On this DCF view, VICI Properties stock currently appears undervalued relative to its projected cash flows.

Our Discounted Cash Flow (DCF) analysis suggests VICI Properties is undervalued by 47.2%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Is VICI Properties a Bargain on Earnings?

The P/E ratio suits VICI Properties because earnings are a key lens for income focused REIT investors. Right now the stock trades on a P/E of about 9.6x, which is well below the Specialized REITs industry average of 16.4x and also far under the broader peer group average of 52.2x. That puts VICI Properties at a clear discount on earnings compared with many similar real estate stocks.

Simply Wall St's model also estimates a tailored fair P/E of about 32.0x for VICI Properties, based on factors such as its sector, size and risk profile. Compared with that fair ratio, the current multiple around 9.6x is much lower, which points to a sizeable earnings based valuation gap.

On this P/E view, VICI Properties stock appears undervalued compared with both its sector and the modelled fair multiple.

The VICI Properties Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the valuation puzzle for VICI Properties leaves off and spell out what would need to happen to growth, margins and earnings for the stock to be worth materially more or materially less than today’s price, which you can find on the Community page. Rather than a single multiple or model result, each one lays out the assumptions behind its fair value so you can compare them with future reported numbers.

You can add your voice to the VICI Properties story by sharing a Narrative that lays out a clear, number driven view on where its growth, margins and execution go from here. Set out your thesis now and see how it stacks up as new results come through.

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

The Bottom Line

VICI Properties screens as undervalued on both the Discounted Cash Flow (DCF) intrinsic value estimate and on earnings based multiples, which is a rare alignment for any stock. The key question is whether the current discount is compensation for real risks around financing costs and tenant health or whether the market has simply marked the stock down too far. From here the debate turns on that single issue. Depending on how sentiment around those risks evolves, the current gap between intrinsic value and market price could either persist or close if cash flows and tenant quality hold up.

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.