Assessing American Assets Trust’s Valuation After a Tough Year for the Share Price

American Assets Trust (AAT) has been grinding through a tough stretch, with the stock down sharply this year even as revenue inches higher, making the REIT increasingly interesting for value-focused income investors.

See our latest analysis for American Assets Trust.

At around $19.44, American Assets Trust’s recent weakness, including a sharp year to date share price return decline, has come as investors reassess REIT risk, even though the three and five year total shareholder returns already reflect a long, grinding reset. Overall, short term momentum looks soft while the longer term picture shows a drawn out, value driven repricing rather than a sudden loss of confidence.

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With revenue still creeping higher while profits lag and the share price trails its history, is American Assets Trust quietly trading below its intrinsic value, or is the market already discounting all of its future growth?

Price-to-Earnings of 19.3x: Is it justified?

On a price-to-earnings basis, American Assets Trust looks expensive at 19.3x earnings relative to both its fair value benchmark and much of the REIT universe, despite the depressed share price around $19.44.

The price-to-earnings multiple compares what investors pay today for each dollar of current earnings, a key lens for income oriented investors assessing REITs with relatively steady cash generation. For AAT, this ratio suggests the market is attaching a richer than average price tag to its current profit base.

Relative to the broader Global REITs industry average of 15.8x, AAT trades on a meaningfully higher multiple, signaling that investors are still willing to pay up versus peers. Yet when stacked against its estimated fair price-to-earnings ratio of 7.8x, the current 19.3x level implies a valuation that could have further room to compress if sentiment or earnings expectations weaken.

Explore the SWS fair ratio for American Assets Trust

Result: Price-to-Earnings of 19.3x (OVERVALUED)

However, the narrative could quickly unravel if earnings keep shrinking despite modest revenue growth, or if investor appetite for office and retail REIT risk weakens further.

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

Another View: Discounted Cash Flow Signals Upside

While the 19.3x earnings multiple makes AAT look pricey, our DCF model tells a different story. It puts fair value closer to $22.79 per share, about 14.7% above today’s $19.44. Is the market overlooking slow but steady cash flows, or is the model too optimistic?

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 927 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 see the story differently or want to dive deeper into the numbers yourself, you can build a personalized view in just 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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