Terreno Realty Jumps 4% as Warehouse Demand Boosts Valuation Debate for 2025

Thinking about what to do with Terreno Realty stock right now? You’re definitely not alone. Investors have noticed some interesting shifts recently and are weighing the potential for growth against lingering risks. Just in the past week, Terreno Realty’s share price has popped 4.0% and is up 2.2% over the last month. That’s enough to catch anyone’s eye, especially for a company with a solid long-term track record, including a 24.6% gain over three years. On the other hand, the stock is still down 4.0% over the last year, showing that sentiment has been mixed as the broader market continues to digest changing interest rates and industrial demand.

Even so, market chatter around logistics and industrial real estate has kept Terreno in the spotlight. Investor optimism around potential demand for warehouse space seems to have improved the company’s risk outlook, nudging the stock higher despite the recent volatility. The real question is whether the current $59.87 price tag actually represents a bargain or if things are looking a bit overheated.

On that note, Terreno Realty posts a valuation score of 4 out of 6, meaning it is judged to be undervalued in four major checks. Those are encouraging odds for value-oriented investors, but let’s not stop there. Next, we’ll dig into the different ways analysts break down a stock’s valuation and look for clues about whether Terreno Realty truly stands out. Spoiler: there may be an even better way to think about “undervalued” than what the scores alone suggest, and we’ll save that for later in the article.

Terreno Realty delivered -4.0% returns over the last year. See how this stacks up to the rest of the Industrial REITs industry.

Approach 1: Terreno Realty Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by estimating the value of Terreno Realty based on its future expected cash flows from adjusted funds from operations, which are projected outward and then discounted back to today's dollars. This method helps investors determine what the company is truly worth, instead of relying solely on market sentiment or earnings multiples.

For Terreno Realty, the latest reported Free Cash Flow stands at $231.9 million. Analysts provide cash flow estimates up to about five years out, with Terreno’s free cash flow projected to grow steadily and reach $375 million by 2029. Beyond the five-year mark, Simply Wall St extrapolates further, expecting this growth trend to continue. All cash flows are denominated in USD, so these projections give a clear, apples-to-apples look at valuation.

Based on these calculations, the DCF analysis values Terreno Realty’s shares at $81.85, indicating the current price of $59.87 leaves the stock approximately 26.9% undervalued. This suggests the shares are trading at a notable discount to their intrinsic value using this method.

Result: UNDERVALUED

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

Our Discounted Cash Flow (DCF) analysis suggests Terreno Realty is undervalued by 26.9%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Terreno Realty Price vs Earnings (PE)

The Price-to-Earnings (PE) ratio is a classic valuation tool for companies like Terreno Realty that are consistently profitable. Since earnings are the main driver of long-term value, the PE ratio provides a clear snapshot of how much investors are willing to pay today for each dollar of earnings. This makes it especially relevant when profits are stable and growing.

What constitutes a “fair” PE ratio can vary. Investors typically consider a company’s future growth prospects and level of risk. If earnings are expected to grow faster than average, a higher PE ratio can be justified. Conversely, higher risks or slower growth trends usually bring valuations down.

Terreno Realty is currently trading at a PE ratio of 24.44x. This is above the Industrial REITs industry average of 16.39x but below the average of close peers, which sits at 33.20x. While a simple industry or peer comparison offers some context, it may miss the nuances that actually matter to valuation.

This is where Simply Wall St’s “Fair Ratio” comes in. The Fair Ratio for Terreno Realty is 29.80x, and it incorporates growth expectations, profit margin, company size, risk profile, and industry considerations. By weighing these factors, the Fair Ratio gives a more holistic and tailored view than basic peer or industry benchmarks.

When comparing Terreno’s current PE ratio of 24.44x to its Fair Ratio of 29.80x, the stock appears to be undervalued on an earnings multiple basis. The current price does not fully reflect its growth outlook and financial profile. According to this metric, there may be potential for upside.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your Terreno Realty Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, clear storyline that connects your perspective on a company like Terreno Realty with expected numbers, such as future revenue, earnings, and margins, all the way to what you believe is a fair value. Narratives let you look past static metrics by linking the company’s story and outlook to a financial forecast, giving you a more realistic, personalized estimate of value.

This approach is made easy and accessible through Simply Wall St’s Community page, which is trusted by millions of investors. Narratives let you decide when to buy or sell, based on whether your own fair value estimate is above or below the market price, and they are continually updated when new data or news arrives. For example, with Terreno Realty, some investors see a fair value as high as $85, while others are more cautious and view $60 as justified. This reflects how different stories lead to different conclusions. Narratives offer a dynamic and actionable way to make more confident decisions, bridging numbers, news, and your unique outlook in one powerful tool.

Do you think there's more to the story for Terreno Realty? Create your own Narrative to let the Community know!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com