Does the Recent 24% Drop in Apple Hospitality REIT Signal an Opportunity in 2025?

• Wondering if Apple Hospitality REIT's current price tag is a hidden bargain or a red flag? You are not alone, and we are about to dig into its true value together.
• After a bumpy ride recently, the stock is down 2.8% over the past week and sits nearly 24% lower year-to-date. This has raised questions about changing market sentiment and future potential.
• Lately, broader real estate investment trust sector volatility and shifting investor attitudes toward interest rate changes have played a role in these price swings. For Apple Hospitality REIT specifically, news about strategic asset acquisitions and portfolio updates keeps the company in the spotlight as the hotel market evolves.
• Looking at our quick valuation health check, the company earns a 5 out of 6. This suggests it appears undervalued by most measures. We will break down these individual valuation lenses shortly, but stay tuned for an even smarter way to get to the heart of what Apple Hospitality REIT is really worth by the end of this article.

Find out why Apple Hospitality REIT's -19.1% return over the last year is lagging behind its peers.

Approach 1: Apple Hospitality REIT Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company’s intrinsic value by projecting its future cash flows using adjusted funds from operations and discounting them back to today’s dollars. This approach provides a data-driven view of where the stock might be heading compared to where it trades now.

For Apple Hospitality REIT, the latest figures show a free cash flow (FCF) of $384.93 million. Analysts forecast its FCF to be $287.63 million by the end of 2026, with subsequent years extrapolated by Simply Wall St as the company matures. Over the next decade, FCF projections remain between about $265 million and $297 million annually, all referenced in US dollars. These numbers help create a baseline for computing intrinsic value via the DCF method.

Based on these calculations, Apple Hospitality REIT’s DCF intrinsic value is $19.84 per share. Given the current market price, this represents a 41.7% discount, implying the stock is significantly undervalued according to this model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Apple Hospitality REIT is undervalued by 41.7%. Track this in your watchlist or portfolio, or discover 906 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 Apple Hospitality REIT.

Approach 2: Apple Hospitality REIT Price vs Earnings

The price-to-earnings (PE) ratio is a popular way to value profitable companies because it directly compares a stock’s price with its earnings. This helps investors see how much they are paying for each dollar of profit. It is especially relevant for companies like Apple Hospitality REIT, which have a consistent profit history.

Market expectations for growth and risk play a big part in what counts as a “normal” or fair PE ratio. Companies with strong growth prospects and lower risk typically command higher multiples, while slower-growing or riskier businesses may see their PE ratios stay below the industry average.

Apple Hospitality REIT currently trades at a PE ratio of 15.58x. For context, the industry average for Hotel and Resort REITs is also around 15.58x, while the leading peer average sits sharply higher at 58.13x. This positions Apple Hospitality REIT right at the industry norm but well below some of its more richly valued peers.

Simply Wall St’s proprietary “Fair Ratio” estimates the company’s justified PE based on tailored factors like earnings growth outlook, profit margins, its specific industry, market capitalization, and even unique business risks. This individualized approach goes beyond simple peer and sector comparisons, providing a far more nuanced reading of whether the current market price is reasonable.

With a Fair Ratio of 30.74x versus the current 15.58x, Apple Hospitality REIT is valued well below what these underlying fundamentals would suggest. This points to a stock that could be undervalued by the market.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1420 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Apple Hospitality REIT Narrative

Earlier we mentioned there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your investment story for a company, the reasoning and expectations you have about its future, which you can easily express on Simply Wall St's Community page.

Unlike static metrics, Narratives tie together your outlook for Apple Hospitality REIT’s revenue growth, profit margins, and risks, linking these assumptions to a dynamic fair value target. This helps you make clear, confident decisions by comparing that fair value to the current market price, showing if it's time to buy, hold, or sell.

Best of all, Narratives automatically update as fresh news or earnings emerge, so your story stays relevant. For example, one investor might craft a bullish Narrative focused on resilient travel demand and effective cost controls, arriving at a fair value near $15.00. Another might build a more cautious Narrative, highlighting refinancing risks and industry headwinds, supporting a much lower fair value closer to $12.00. By comparing your view to those of other investors, Narratives empower you to understand the "why" behind the price and act when your convictions differ.

Do you think there's more to the story for Apple Hospitality REIT? 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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