Vornado Realty Trust (VNO) has agreed to a joint venture with Rudin Management and an affiliate of Kenneth C. Griffin to develop a 1.9 million square foot office tower at 350 Park Avenue.

The joint venture announcement comes as Vornado Realty Trust trades at US$37.88, with the share price down 4.63% over the past month but up 15.84% over 90 days and supported by a 71.16% three year total shareholder return. This points to momentum building over the longer period even as investors reassess near term risks around major development commitments.

If this large New York office project has you thinking about where else capital is moving, it can be useful to scan the market for other real asset and infrastructure plays through the 39 power grid technology and infrastructure stocks

Vornado Realty Trust now has a high profile development on the table and a share price that has already moved over the past quarter. Is it more attractive to commit at today’s level, or to wait for a lower entry before the valuation work stacks up?

Most Popular Narrative: 5% Overvalued

The most followed narrative puts Vornado Realty Trust’s fair value at $36.08, slightly below the latest close at $37.88, which frames the analyst debate around today’s pricing.

The analysts have a consensus price target of $36.08 for Vornado Realty Trust based on their expectations of its future earnings growth, profit margins and other risk factors.

However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $28.0.

Want to understand why this narrative still lands close to today’s price despite modest revenue growth assumptions and a sharp reset in modeled profitability and future earnings multiples?

Result: Fair Value of $36.08 (OVERVALUED)

However, there are still clear risks that could shift this Vornado Realty Trust narrative, including pressure on modeled profit margins and a very high implied future P/E multiple.

Another View on Vornado Realty Trust’s Value

The analyst narrative suggests Vornado Realty Trust is about 5% overvalued against a US$36.08 fair value. The SWS DCF model points in the opposite direction and indicates a fair value of US$53.08, with the current US$37.88 price trading 28.6% below that estimate.

This gap between the analyst target and the DCF output leaves a wide range of possible outcomes for investors to consider. Which set of assumptions appears more realistic to you: the cautious analyst path or the more supportive cash flow model?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Vornado Realty Trust 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 48 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

With Vornado Realty Trust pulled between upbeat expectations and clear concerns, it helps to move quickly and test the underlying data for yourself. To see both the upside and the potential drawbacks in one place, review the 2 key rewards and 5 important warning signs

Looking for more investment ideas beyond Vornado Realty Trust?

If Vornado Realty Trust has sharpened your appetite for opportunities, do not stop here. Use the Simply Wall St screener to explore ideas that align with your approach.

• Target reliable income streams by reviewing companies in the 12 dividend fortresses that may suit investors who prioritise steady cash returns.
• Focus on quality at a reasonable price by scanning the 48 high quality undervalued stocks that highlight strong fundamentals with appealing valuations.
• Consider resilience by assessing stocks in the 75 resilient stocks with low risk scores that score well on financial strength and lower overall risk profiles.

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.