A Look At American Homes 4 Rent (AMH) Valuation After Recent Wave Of Analyst Downgrades

Why analyst downgrades have put American Homes 4 Rent in focus

Several major Wall Street firms recently lowered their views on American Homes 4 Rent (AMH). This has pushed the stock higher on many investors’ watchlists and raised fresh questions about the REIT’s current pricing.

See our latest analysis for American Homes 4 Rent.

At a share price of $32.36, American Homes 4 Rent has seen short term momentum pick up, with a 1-day share price return of 2.02% and a 7-day share price return of 4.32%. Its 1-year total shareholder return of a 4.73% decline and 5-year total shareholder return of 17.07% point to a more mixed longer term picture as recent analyst downgrades refocus attention on the balance between growth expectations and risk.

If analyst moves around AMH have you reassessing your watchlist, it could be a good moment to broaden your search with fast growing stocks with high insider ownership.

With AMH trading at $32.36 and sitting at a discount to both some analyst targets and one intrinsic value estimate, the real question is whether this signals a genuine buying opportunity or if markets are already pricing in future growth.

Most Popular Narrative: 13.8% Undervalued

Compared with the last close at $32.36, the most followed narrative sees American Homes 4 Rent’s fair value closer to the high $30s, based on detailed cash flow and earnings work.

The analysts have a consensus price target of $40.45 for American Homes 4 Rent based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $36.0.

Read the complete narrative.

Revenue climbing, margins compressing, and a future P/E that looks more like a growth stock than a REIT, this narrative leans heavily on bold earnings math. Curious which assumptions matter most for that fair value call?

Using a discount rate of 7.21%, the narrative points to a fair value of about $37.55, which is roughly 13.8% above the current $32.36 share price. That framework builds on expectations for continued revenue growth, lower profit margins over time, and a higher future earnings multiple than the sector currently trades on.

Result: Fair Value of $37.55 (UNDERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, softer single family rental demand and more cautious occupancy assumptions could pressure revenue forecasts and make those upbeat earnings and P/E assumptions appear stretched.

Find out about the key risks to this American Homes 4 Rent narrative.

Build Your Own American Homes 4 Rent Narrative

If you look at these assumptions and feel they do not quite fit your view, you can always test the numbers yourself and Do it your way in just a few minutes.

A great starting point for your American Homes 4 Rent research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If AMH has sharpened your focus on pricing and expectations, do not stop here. Use the Screener to spot other opportunities before they move without you.

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.

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