Invitation Homes Inc.INVHNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $40.03 per share(market-calibrated)

+52.5%

Upside to Fair Value

Current

$26.25

Pure Model

$43.01

Fair Value

$40.03

Bull Case

$54.88

Bear Case

$33.07

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $43.01.

What's Driving This Ratingfor INVH

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.95% of revenue (heavy investment phase). Model fades this to 2.50% by Year 10, freeing up ~$130M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 30.63% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 2.43% revenue growth, fading to 2.50% by Year 10. Revenue reaches $3.8B (vs $2.7B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 83.42% indicates efficient cash generation. FCF reaches $1.7B by Year 10 (46.13% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.83

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)8.25%

Cost of Debt

Pre-tax Cost of Debt4.01%

Tax Rate21.00%

After-tax Cost of Debt3.17%

Equity Weight (E/V)65.75%

Debt Weight (D/V)34.25%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (65.75% × 8.25%) + (34.25% × 3.17%)

= 6.51%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$2.8B	$3.1B	$3.3B	$3.5B	$3.8B
EBIT	$856M	$946M	$1.0B	$1.1B	$1.2B
Tax	$180M	$199M	$214M	$225M	$242M
NOPAT	$676M	$747M	$805M	$846M	$911M
+ Depreciation	$689M	$762M	$821M	$862M	$929M
- Capex	$166M	$160M	$147M	$128M	$94M
- Δ NWC	$6M	$21M	$8M	$8M	$9M
Free Cash Flow	$1.2B	$1.3B	$1.5B	$1.6B	$1.7B
Discount Factor	0.939	0.828	0.730	0.643	0.532
Present Value	$1.1B	$1.1B	$1.1B	$1.0B	$924M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.7B

Terminal Growth Rate2.50%

WACC6.51%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$44.4B

PV of Terminal Value$23.6B

Exit Multiple Method

Year 10 EBITDA$2.1B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$45.8B

PV of Terminal Value$24.4B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$10.4B

PV of Terminal Value$23.6B

Enterprise Value$34.0B

(-) Net Debt$8.0B

Equity Value$26.0B

Shares Outstanding613M

Price per Share$42.39

Exit Multiple Method

PV of Projected FCFs$10.4B

PV of Terminal Value$24.4B

Enterprise Value$34.8B

(-) Net Debt$8.0B

Equity Value$26.7B

Shares Outstanding613M

Price per Share$43.62

Pure Model Fair Value

$43.01

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
4.51%	$60.44	$66.74	$76.17	$72.94	$69.54
5.51%	$47.55	$50.66	$54.79	$60.57	$69.23
6.51%	$39.01	$40.79	$43.01	$45.86	$49.66
7.51%	$32.75	$33.86	$35.20	$36.83	$38.87
8.51%	$27.85	$28.59	$29.46	$30.49	$31.72

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$33.07

26.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.04

Base Case

$43.01

63.9% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.83

Bull Case

$54.88

109.1% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.71

Key Assumptions & Drivers• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth2.43%

Year 3 Revenue Growth7.70%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin30.63%

Tax Rate21.00%

Historical Capex / Rev5.95%

Terminal Capex / Rev2.50%

NWC / Revenue9.64%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 22x EV/EBITDA (Real Estate sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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