Is Now the Right Moment for Arbor Realty Trust After Recent 6% Share Price Surge?

• Ever wonder if now is the moment to scoop up Arbor Realty Trust at a bargain, or if the market has already priced in all the potential? Let's dig into what might be driving its value story right now.
• After a choppy year, Arbor Realty Trust's share price has surged 6.0% in the past week. However, it is still down 21.8% in the past month and 34.5% year-to-date, highlighting both recent momentum and ongoing uncertainty.
• Recent headlines have put Arbor Realty Trust in the spotlight as investors weigh changing conditions in the real estate and lending markets, particularly with shifting interest rates and tightening credit access. Ongoing discussions about commercial real estate risk have added extra volatility, with market sentiment swinging on both macro trends and sector outlooks.
• Despite all the noise, Arbor Realty Trust achieves a solid valuation score of 5 out of 6, meaning it is undervalued based on most traditional measures. We’ll explore how that score was calculated using different valuation approaches. Keep reading, because there is an even smarter way to get the full picture at the end of this article.

Find out why Arbor Realty Trust's -30.4% return over the last year is lagging behind its peers.

Approach 1: Arbor Realty Trust Excess Returns Analysis

The Excess Returns valuation model analyzes whether a company generates returns on its invested capital that exceed its cost of equity. This approach helps investors understand how effectively Arbor Realty Trust uses shareholders’ funds to create value above what similar-risk investments might deliver.

For Arbor Realty Trust, the current Book Value stands at $12.08 per share, and the Stable Earnings Per Share (EPS) is $1.34, based on the median Return on Equity from the past five years. The company's Cost of Equity is $1.06 per share, resulting in an annual Excess Return of $0.28 per share. Arbor’s average Return on Equity comes in at 11.21%, while analysts estimate the Stable Book Value at $11.93 per share going forward.

Based on this model, the intrinsic value implied by Arbor Realty Trust’s excess returns suggests the stock is 46.5% undervalued at current prices. This substantial discount indicates that the market may not be fully recognizing the company’s ability to generate returns above its cost of capital. Some investors may view this as an attractive opportunity for value-focused investing.

Result: UNDERVALUED

Our Excess Returns analysis suggests Arbor Realty Trust is undervalued by 46.5%. Track this in your watchlist or portfolio, or discover 933 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Arbor Realty Trust.

Approach 2: Arbor Realty Trust Price vs Earnings

The Price-to-Earnings (PE) ratio is a popular valuation metric for profitable companies like Arbor Realty Trust because it directly compares what investors are willing to pay today for each dollar of company earnings. Generally, a lower PE suggests a stock might be undervalued, while a higher PE could indicate higher growth expectations or increased risks being priced in.

When looking at PE, growth outlook and risk are crucial. Companies with strong earnings growth prospects or stable income streams often warrant higher PE ratios, while those in riskier sectors or with slower growth typically trade at lower multiples.

Currently, Arbor Realty Trust is trading at a PE ratio of 11.58x. This is noticeably below the Mortgage REITs industry average of 12.8x and its peer group average of 13.43x. On the surface, this could suggest Arbor is undervalued against industry benchmarks.

However, Simply Wall St’s proprietary Fair Ratio for Arbor, which takes into account not only industry and market cap but also key growth and risk factors, is calculated at 13.67x. This approach offers a more tailored assessment than just comparing against broad averages or similar companies, as it incorporates company-specific factors such as profit margins and forward growth rates.

Because Arbor's actual PE of 11.58x is well below the Fair Ratio of 13.67x, the stock is considered undervalued according to this metric. This gap indicates the market may not be fully pricing in the company's earnings power and growth outlook at current levels.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Arbor Realty Trust Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives, an intuitive approach that brings your investment perspective to life by connecting Arbor Realty Trust’s story to its financial future and fair value. Narratives let you outline your view of the company, including your assumptions about future revenue, earnings, and profit margins, and transform them into a clear, actionable forecast.

This innovative tool, available within the Simply Wall St Community page, empowers millions of investors to easily build and share their own financial storylines for any company. With Narratives, it is simple to see how your fair value estimate compares to Arbor Realty Trust’s current price, helping you decide how to approach the stock while staying informed as new information dynamically updates your scenario.

For example, if you believe the company will overcome industry headwinds and outperform, you might set a bullish fair value near $15.00. A more cautious investor could land closer to $10.50 based on different profit and growth assumptions. This demonstrates there is no single “right” answer, just your Narrative versus the current market price.

Do you think there's more to the story for Arbor Realty Trust? 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.

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