Realty Income Corp. scores 20 for management and 57 for moat. The management score rests on a return on invested capital of 24.5% and a gross margin of 89.8% — figures that describe capital earning less than it costs to employ. Debt sits at 0.83x equity. A moderate moat alongside weak management is a combination worth understanding before the price matters at all.
Three independent anchors set the price worth paying. Growth is modelled at 15.0% a year, below the 28.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 30.0x. That produces an intrinsic value of $41.10, a 10-CAP price of $29.71 and a payback time price of $46.91, with the value zone set at the highest of the three, $46.91. Today's price of $53.53 sits 14% above it.
The price is above the value zone and the business scores 57 for moat and 20 for management. Neither test argues for paying up here.
| Price | $53.53 |
| Market cap | $49.9B |
| P/E ratio | 39.1x |
| Return on invested capital | 24.5% |
| Gross margin | 89.8% |
| Debt to equity | 0.83x |
| Free cash flow yield | 7.8% |
| Growth rate used | 15.0% |
| Growth rate measured | 28.0% |
| Exit multiple assumed | 30.0x |
| Company | Moat | Buy price |
| Simon Property Group (SPG) | 73 | $117.37 |
| Kimco Realty (KIM) | 44 | $22.40 |
| Regency Centers (REG) | 44 | $39.12 |
| Federal Realty Investment Trust (FRT) | 46 | $88.59 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Realty Income Corp. rather than accepting ours.