Using an unlevered Free Cash Flow to Firm (FCFF) model, we project AvalonBay Communities, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 2.3% to -4.7% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 45, DPO 29, DIO 60). At a 6.8% WACC with mid-year discounting, the terminal value (76% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 14.9x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $172.34 per share, suggesting AVB is fairly valued by 4.9% at the current price of $164.29.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 1,645 | 1,721 | 1,820 | 1,882 | 1,794 | 1,839 |
| (−) Net Interest | 263 | 275 | 290 | 300 | 286 | 293 |
| (+) D&A | 198 | 212 | 224 | 234 | 246 | 252 |
| EBITDA | 2,106 | 2,207 | 2,334 | 2,416 | 2,326 | 2,384 |
| (−) Tax | 9 | 10 | 10 | 11 | 10 | — |
| (−) CapEx | 224 | 234 | 248 | 256 | 244 | — |
| (−) ΔWC | 477 | 22 | 29 | 18 | -26 | — |
| Free Cash Flow (FCF) | 1,395 | 1,941 | 2,047 | 2,131 | 2,097 | — |
| Peers' EBITDA Multiple | 14.9x | |||||
| Terminal Value | 35,447 | |||||
| WACC / Discount Rate | 6.80% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 1,350 | 1,759 | 1,737 | 1,693 | 1,560 | 25,516 |
| Enterprise Value | 33,614 | |||||
| Projection Period | 8,098 | 24.1% | ||||
| Terminal Value | 25,516 | 75.9% | ||||
| (−) Current Net Debt | 9,141 | |||||
| Equity Value | 24,472 | |||||
| (÷) Outstanding Shares | 142M | |||||
| Fair Price | $172 | +4.9% | ||||
| WACC \ EV/EBITDA Exit Multiple | 10.9x | 12.9x | 14.9x | 16.9x | 18.9x |
|---|---|---|---|---|---|
| 4.8% | $140 | $166 | $193 | $220 | $246 |
| 5.8% | $132 | $157 | $182 | $208 | $233 |
| 6.8% | $124 | $148 | $172 | $197 | $221 |
| 7.8% | $117 | $140 | $163 | $186 | $209 |
| 8.8% | $110 | $132 | $154 | $176 | $198 |
Current price: $164.29. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.