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Realty Income Corporation (O) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Realty Income Corporation (O)

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Intrinsic Value (DCF)

Current$60.72
→
Intrinsic$112.19
+85%
$65.09$112.19$205.76
Market implies 13% growth for 5 years
DCF analysis suggests O could have 85% upside at 25% growth — verify assumptions match your view.
At $61, the market prices in 13% annual cash flow growth — a moderate expectation aligned with historical trends (25%).
Range: Bear $65 → Bull $206. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →21%23%25%27%
8%$150$165$181$197
10%$92$102$112$123
12%$62$69$76$84
14%$43$48$54$60

Bull Case

  • Bull case ($206) offers 239% upside at 30% growth, 8% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (13%) ≤ historical CAGR (25%)

Bear Case

  • Bear case ($65) with 20% growth, 12% discount rate
  • Using 25% growth — aggressive, watch for mean reversion
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5-Year FFO Projection

Year 1$4.07B
Year 2$5.09B
Year 3$6.36B
Year 4$7.95B
Year 5$9.94B
Terminal$157.48B

📐 Model Inputs

Growth Rate25.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate9.5%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base FFO$3.26BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses FFO per NAREIT standards. See FAQ below for full methodology.

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Frequently Asked Questions

Is O stock undervalued or overvalued?
🟢 UNDERVALUED

O trades at $60.72 vs. our DCF-derived intrinsic value of $87.66, implying +53% upside. At a 9.5% WACC and 25.0% projected FCF growth, the market appears to be underpricing the present value of O's future cash flows. The bear case ($45.78) still suggests upside, providing margin of safety.

What is O's intrinsic value?

Using a 5-year DCF model: Base FCF of $3.26B, projected at 25.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 9.5% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $26.31B net debt and dividing by 0.88B shares: Bear $45.78 | Base $87.66 | Bull $151.28. Current price $60.72 implies +53% to base case.

How is O's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 25.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=9.5%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($103.17B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 31.7x.