American Assets Trust (AAT): Exploring Valuation After Recent Share Price Moves

American Assets Trust (AAT) shares moved slightly in recent sessions, catching some attention from investors tracking the real estate sector. With performance mostly steady, it is a good opportunity to examine how AAT’s fundamentals stack up this month.

See our latest analysis for American Assets Trust.

American Assets Trust has seen its share price bounce in recent days, but when taking a broader view, momentum has been mixed. This year the share price has slipped by 25.8 percent, and over the past twelve months, the total shareholder return sits at minus 24.9 percent. This reflects ongoing caution around the real estate sector despite occasional pockets of optimism.

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With shares trading below analyst targets and fundamentals under pressure, investors may wonder if American Assets Trust is currently undervalued or if the market is already accounting for all of its future prospects.

Price-to-Earnings of 19.2x: Is it justified?

American Assets Trust is currently trading at a price-to-earnings (P/E) ratio of 19.2x, which raises questions about whether investors are paying too much for each dollar of the company’s earnings, given its recent share price trends.

The price-to-earnings ratio measures how much investors are willing to pay for a company’s profits. It is closely watched in the real estate sector, where reliable earnings are often prized and valuations can swing depending on the outlook for profit and cash flow stability.

Although American Assets Trust’s earnings grew faster than the sector over the past year, its P/E of 19.2x exceeds the global REITs industry average of 15.3x. Relative to peers, this suggests investors are expecting more than the sector norm from AAT. However, this optimism contrasts with the company’s own fair P/E of 3.3x, adding to skepticism over whether such a premium is warranted.

Explore the SWS fair ratio for American Assets Trust

Result: Price-to-Earnings of 19.2x (OVERVALUED)

However, the company's negative net income growth and prolonged negative total returns signal ongoing risks that could hinder any near-term recovery.

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

Another View: What Does the SWS DCF Model Signal?

While the market’s valuation relies heavily on earnings multiples, our DCF model presents a different perspective. According to this method, American Assets Trust’s shares are trading about 14.8 percent below their estimated fair value, suggesting the stock could be undervalued at current prices. Does this method present an opportunity that other investors might be missing?

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 882 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

For those who have a different take or want to dig deeper into the numbers themselves, it's possible to build your personal outlook 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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