U
sing the 2-stage free cash flow to equity model, Agility Real Estate's fair value estimate is US$2.73. The company's current share price of US$2.64 suggests it is trading at similar levels as its estimated intrinsic value. In comparison, the average premium for Agility Real Estate's competitors is currently 33%.

    To determine if the stock is fairly priced, we use the Discounted Cash Flow (DCF) model, which estimates a company's future cash flows and discounts them to their present value. The DCF model assumes two stages of growth: an initial period with a higher growth rate and a second stage with a stable growth rate.

    We estimate Agility Real Estate's next ten years of cash flows by extrapolating its previous free cash flow (FCF) from the company's last reported value. We assume companies with shrinking FCF will slow their rate of shrinkage, and those with growing FCF will see their growth rate slow over this period.

    The present value of the 10-year cash flow is US$1.6m, calculated by discounting future cash flows to today's value using a cost of equity of 15%. The second stage, or Terminal Value, is estimated at US$412k, representing the business's cash flow after the first stage.

    The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$2.0m. Dividing the equity value by the number of shares outstanding gives a fair value estimate of US$2.73 per share.

    Agility Real Estate's current share price indicates it is trading at similar levels as its estimated intrinsic value, with a 3.3% discount to where the stock price trades currently. However, valuations are imprecise instruments and should be used in conjunction with other factors when making investment decisions.

    Important assumptions in the DCF model include the discount rate and actual cash flows. The cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC), which accounts for debt. A levered beta of 2.000 is used to estimate the cost of equity.

    A SWOT analysis highlights Agility Real Estate's strengths, including earnings growth and a well-covered balance sheet, as well as weaknesses such as diluted shareholder value and key risks associated with investing in the company.

    Next steps include assessing the DCF calculation in conjunction with other factors, such as risks, solid businesses, and environmentally-friendly companies.