American Assets Trust (AAT): Evaluating Valuation Following Q3 Earnings, Property Sale Gain, and New Acquisition

American Assets Trust (AAT) released third quarter earnings showing a dip in revenue and net income from the prior year. The company also announced a property sale gain and a new multifamily acquisition.

See our latest analysis for American Assets Trust.

Despite management’s upbeat guidance and active portfolio reshuffling, American Assets Trust’s recent momentum has faded, with a year-to-date share price return of -27.24% and a 1-year total shareholder return of -25.74%. Even with the dividend affirmation and new acquisitions signaling some resilience, the market seems to remain cautious about the company’s near-term outlook.

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With shares trading below analyst price targets and an ongoing effort to strengthen its portfolio, the key question is whether American Assets Trust is currently undervalued or if the market is already factoring in any future rebound for the stock.

Price-to-Earnings of 18.9x: Is it justified?

American Assets Trust is currently trading at a price-to-earnings (P/E) ratio of 18.9x, making it more expensive than the average REIT in the global market. With its last close at $18.96, investors are paying a premium for each dollar of earnings relative to many peers.

The price-to-earnings ratio measures how much investors are willing to pay for each dollar of reported profit. It is a widely used metric for evaluating real estate investment trusts because it reflects the relationship between earnings and market value. For AAT, this number serves as a barometer for investor expectations compared to sector norms.

The current P/E is higher than the global REITs industry average of 15.3x. This suggests the stock is relatively expensive at present levels. Compared to the estimated fair P/E ratio of 3.3x based on company and market fundamentals, AAT appears to be priced significantly above where the market could adjust if conditions normalize and expectations reset.

Explore the SWS fair ratio for American Assets Trust

Result: Price-to-Earnings of 18.9x (OVERVALUED)

However, ongoing declines in net income and recent negative total returns could signal further downside if operational improvements do not materialize soon.

Find out about the key risks to this American Assets Trust narrative.

Another View: Discounted Cash Flow Perspective

Looking at American Assets Trust through our DCF model, the picture changes. The SWS DCF model estimates a fair value of $21.50 per share, while the current price lags at $18.96. That suggests the stock is undervalued, at least on this measure. However, it remains to be seen if this model’s optimism will play out in reality.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out American Assets 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 843 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own American Assets Trust Narrative

If you would rather make your own assessment or believe there is more to uncover in the numbers, you can build a personalized narrative in just a few minutes, Do it your way

A great starting point for your American Assets Trust research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.

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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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