- Investors may be wondering whether Highwoods Properties at around US$24.71 is starting to look like value, or if the price still does not quite stack up.
- The stock has recently shown mixed returns, with a 3.4% gain over 7 days and 15.4% over 30 days, set against a 4.5% decline year to date and an 8.9% decline over the past year.
- Recent coverage has focused on how office focused real estate investment trusts fit into investors' portfolios as hybrid work patterns and demand for office space continue to evolve. This broader sector conversation has provided context for the share price moves in Highwoods Properties as investors reassess risk and required returns.
- Highwoods Properties currently has a valuation score of 4 out of 6. The next step is to break that down using different valuation approaches, and then return to a more complete way of thinking about value later in the article.
Find out why Highwoods Properties's -8.9% return over the last year is lagging behind its peers.
Approach 1: Highwoods Properties Discounted Cash Flow (DCF) Analysis
The Discounted Cash Flow, or DCF, approach used here projects Highwoods Properties' adjusted funds from operations over time and then discounts those future cash flows back to today to estimate what the business could be worth now.
Highwoods Properties has last twelve month free cash flow of about $385 million, using adjusted funds from operations. Analyst and extrapolated projections suggest annual free cash flow in the range of about $206 million in 2026 and $240 million in 2030, with interim years between those levels and further estimates out to 2035 provided by Simply Wall St.
When all those projected cash flows are discounted back, the model arrives at an estimated intrinsic value of about $37.60 per share. At a recent share price of around $24.71, this implies an intrinsic discount of roughly 34.3%. This indicates the shares are trading below this DCF estimate.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Highwoods Properties is undervalued by 34.3%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.
Approach 2: Highwoods Properties Price vs Earnings
For profitable companies, the P/E ratio is a common way to think about value because it links what you pay per share to the earnings that each share generates. A higher or lower P/E can be reasonable depending on what investors expect for future growth and how risky those earnings are perceived to be.
Highwoods Properties is trading on a P/E of about 29.9x. That sits above the Office REITs industry average of around 16.4x, while still below the peer group average of roughly 47.9x. On the surface, that suggests the market is placing a higher value on Highwoods’ earnings than on the typical company in its industry, but not as high as some peers.
Simply Wall St’s Fair Ratio is intended to refine that comparison by estimating what P/E might be reasonable for Highwoods Properties given its earnings growth profile, profit margins, industry, market value and risk factors. For Highwoods, this Fair Ratio is around 32.9x, which is higher than the current P/E of 29.9x. That gap points to the shares trading below this Fair Ratio based view of value.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Highwoods Properties Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced here as short, structured stories where you set out how you think Highwoods Properties will perform, link that story to forecasts for revenue, earnings and margins, and let the Simply Wall St platform convert those inputs into a Fair Value that you can compare with the current share price to decide whether the stock looks expensive or cheap relative to your own view.
On the Community page, Narratives are easy to use and update automatically when fresh information like news or earnings is added. This means your Fair Value stays aligned with what is happening, and you can see in real time whether your story still holds up.
For Highwoods, one investor might build a Narrative close to the bullish US$38.00 Fair Value, focusing on Sunbelt exposure, high pre leasing and rent mark to market opportunities. Another might lean toward the bearish US$24.00 view, concentrating on remote work headwinds, higher capital expenditure and vacancy risk. The platform simply shows how each story translates into different forecasts and Fair Values without forcing you to agree with either side.
For Highwoods Properties, here are previews of two leading Highwoods Properties Narratives to make comparison easier:
Start with the bullish case if you think the office recovery and Sunbelt positioning can support a higher Fair Value. Alternatively, start with the bear case if you are more cautious about remote work, leasing costs and capital needs. From there, you can adjust the assumptions to align them with your own expectations.
🐂 Highwoods Properties Bull Case
Fair Value: US$26.22 per share
Implied discount vs this Narrative: about 5.8% below Fair Value at the recent US$24.71 share price
Revenue growth used in this Narrative: 4.47% a year
- Assumes Highwoods grows revenue while profit margins flatten out, with analysts modeling revenue of about US$921.8m and earnings of US$91.9m by 2029 and a P/E of 42.2x on those earnings.
- Sees Sunbelt exposure, a younger office portfolio and ongoing recycling of older assets as supports for occupancy, rent levels and long term earnings power, with balance sheet flexibility helping to fund projects.
- Treats the current share price and the analyst consensus Fair Value as broadly aligned, so the focus is on whether you agree with the growth, margin and P/E assumptions that sit behind that US$26.22 target.
🐻 Highwoods Properties Bear Case
Fair Value: US$24.00 per share
Implied premium vs this Narrative: about 3.0% above Fair Value at the recent US$24.71 share price
Revenue growth used in this Narrative: 2.38% a year
- Builds in slower 2.4% annual revenue growth, shrinking margins to 11.2% and earnings of US$96.8m by 2029, combined with a 36.8x P/E, to arrive at a Fair Value at the lower end of the analyst range.
- Highlights the risk that leasing CapEx, incentives and asset sales needed to reshape the portfolio could offset rent spreads, while any softening in Sunbelt job growth or corporate relocations would make it harder to lift occupancy.
- Emphasizes that even the bearish analysts still see only a small gap between today’s price and their US$24.00 target, so the key question for you is whether long term office demand and project execution justify using tougher or milder assumptions than this case.
These Narratives use the same data and valuation engines referenced earlier in the article. They simply make the assumptions more transparent so you can stress test them against what you think is realistic for Highwoods Properties over the next several years.
To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Highwoods Properties on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.
Do you think there's more to the story for Highwoods Properties? Head over to our Community to see what others are saying!
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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