Realty Income CorporationONYSE

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

⚠️Model Warnings

•Revenue projections show 12% decline from peak. Analyst estimates may reflect secular headwinds or transition period.

DCF Valuation Summary

Buy

Fair Value: $77.34 per share(market-calibrated)

+16.3%

Upside to Fair Value

Current

$66.49

Pure Model

$82.30

Fair Value

$77.34

Bull Case

$97.38

Bear Case

$61.72

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

1.10%

Calibrated Growth

2.15%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $82.30.

What's Driving This Ratingfor O

✓

CapEx already efficient

CapEx at 0.11% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 41.24% — below the sector mature average of 44.03%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.6B (41.24% margin).

→

Moderate revenue growth

Analyst consensus projects 5.55% revenue growth, fading to 2.50% by Year 10. Revenue reaches $6.3B (vs $5.3B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $96.78/share (33.6x terminal FCF) while exit multiple gives $67.83/share (23.2x terminal FCF). The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 1.10% perpetual growth — 140bps 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 94.77% indicates efficient cash generation. FCF reaches $4.2B by Year 10 (66.18% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)0.80

Market Risk Premium4.50%

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

Cost of Equity (Re)8.10%

Cost of Debt

Pre-tax Cost of Debt0.00%

Tax Rate7.13%

After-tax Cost of Debt0.00%

Equity Weight (E/V)68.45%

Debt Weight (D/V)31.55%

WACC Calculation

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

WACC = (68.45% × 8.10%) + (31.55% × 0.00%)

= 5.55%

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	$5.6B	$6.3B	$5.6B	$5.8B	$6.3B
EBIT	$2.3B	$2.6B	$2.3B	$2.4B	$2.6B
Tax	$164M	$186M	$164M	$172M	$185M
NOPAT	$2.1B	$2.4B	$2.1B	$2.2B	$2.4B
+ Depreciation	$1.6B	$1.8B	$1.6B	$1.7B	$1.8B
- Capex	$6M	$7M	$6M	$6M	$7M
- Δ NWC	$73M	$98M	$34M	$35M	$38M
Free Cash Flow	$3.6B	$4.1B	$3.7B	$3.9B	$4.2B
Discount Factor	0.947	0.850	0.763	0.685	0.583
Present Value	$3.5B	$3.5B	$2.8B	$2.6B	$2.4B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$4.2B

Terminal Growth Rate2.50%

WACC5.55%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$140.0B

PV of Terminal Value$81.6B

Exit Multiple Method

Year 10 EBITDA$4.4B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$96.7B

PV of Terminal Value$56.3B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$29.2B

PV of Terminal Value$81.6B

Enterprise Value$110.8B

(-) Net Debt$26.3B

Equity Value$84.5B

Shares Outstanding873M

Price per Share$96.78

Exit Multiple Method

PV of Projected FCFs$29.2B

PV of Terminal Value$56.3B

Enterprise Value$85.5B

(-) Net Debt$26.3B

Equity Value$59.2B

Shares Outstanding873M

Price per Share$67.83

Pure Model Fair Value

$82.30

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%
3.55%	$129.26	$125.51	$119.41	$113.58	$108.03
4.55%	$91.37	$101.66	$116.97	$113.58	$108.03
5.55%	$70.41	$75.52	$82.30	$91.74	$105.80
6.55%	$56.53	$59.46	$63.12	$67.81	$74.04
7.55%	$46.35	$48.20	$50.41	$53.11	$56.47

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

$61.72

-7.2% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.00

Base Case

$82.30

23.8% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 0.80

Bull Case

$97.38

46.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.68

Key Assumptions & Drivers• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth5.55%

Year 3 Revenue Growth6.67%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin41.24%

Terminal EBIT Margin44.03%

Tax Rate7.13%

Historical Capex / Rev0.11%

NWC / Revenue24.89%

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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