Sunstone Hotel Investors, Inc.

SHO

Real EstateREIT - Hotel & MotelNYSE

$10.27

Market Cap: $1.91B

Sunstone Hotel Investors, Inc. (SHO) Valuation Summary

Updated Apr 6, 2026 22:28

Model	Range	Fair Value	Upside
▸ Discounted Cash Flow
Growth Exit 5Y	$20.48 – $98.56	$35.10	+288.7%
Growth Exit 10Y	$29.44 – $136.05	$49.52	+448.4%
EBITDA Exit 5Y	$24.71 – $49.47	$36.07	+299.5%
EBITDA Exit 10Y	$33.86 – $72.78	$50.52	+459.4%
▸ Trading Multiples
P/E	$0.66 – $2.91	$2.46	-72.8%
EV/EBITDA	$7.84 – $17.81	$10.35	+14.6%
EV/Revenue	$7.96 – $40.44	$8.05	-10.8%
▸ PEG
PEG Fair Value	$2.24 – $2.24	$2.24	-75.2%
▸ Earnings Power Value
Earnings Power Value	$13.04 – $21.98	$16.59	+83.7%
▸ Dividend Discount
Dividend Discount	$5.81 – $12.96	$8.50	-5.8%

Valuation History

DCF Analysis

Fair Value

$35.10

Market Price

$10.27

Upside / Downside

+241.7%

Verdict

Undervalued

Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Sunstone Hotel Investors, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 3.1% to 17.2% 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 15, DPO 43, DIO 6). At a 7.3% WACC with mid-year discounting, the terminal value (83% of enterprise value) is derived from the Gordon Growth Model on Year 6 FCFF at a 2.5% perpetual rate. After subtracting net debt, the equity value implies a fair price of $35.10 per share, suggesting SHO is undervalued by 241.7% at the current price of $10.27.

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

Terminal Growth

2.50%

0% – 6%

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	Terminal
Profit Before Tax	270	278	289	339	397	407
(−) Net Interest	50	51	53	62	73	75
(+) D&A	59	71	71	97	128	131
EBITDA	379	400	413	498	598	613

(−) Tax	1	1	1	1	1	1
(−) CapEx	123	127	132	155	181	186
(−) ΔWC	-4	-1	-1	-4	-5	-5
Free Cash Flow (FCFF)	259	273	281	347	421	431

Terminal Value						8,996
WACC / Discount Rate	7.3%
Long-term Growth Rate	2.5%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5
Present Value of FCF	250	246	236	271	306	6,328

Enterprise Value	7,636
Projection Period	1,308	17.1%
Terminal Value	6,328	82.9%

(−) Current Net Debt	816

Equity Value	6,820
(/) Outstanding Shares	194

Fair Price	$35.10

Sensitivity Analysis

WACC \ Terminal Growth Rate	1.5%	2.0%	2.5%	3.0%	3.5%
5.3%	$48	$55	$64	$78	$99
6.3%	$37	$41	$46	$52	$61
7.3%	$29	$32	$35	$39	$44
8.3%	$24	$26	$28	$31	$33
9.3%	$20	$22	$23	$25	$27

Current price: $10.27. Green = undervalued, Red = overvalued.

Fair Value

$49.52

Market Price

$10.27

Upside / Downside

+382.1%

Verdict

Undervalued

Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Sunstone Hotel Investors, Inc.'s cash flows over 10 years with analyst estimates for the first 3–5 years, fading toward long-term GDP growth for the remaining years with line-by-line expense modeling. Revenue is projected revenue growing from 3.1% to 5.4% 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 15, DPO 43, DIO 6). At a 7.3% WACC with mid-year discounting, the terminal value (71% of enterprise value) is derived from the Gordon Growth Model on Year 11 FCFF at a 2.5% perpetual rate. After subtracting net debt, the equity value implies a fair price of $49.52 per share, suggesting SHO is undervalued by 382.1% at the current price of $10.27.

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

Terminal Growth

2.50%

0% – 6%

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035	Terminal
Profit Before Tax	270	278	289	339	397	456	513	564	608	641	657
(−) Net Interest	50	51	53	62	73	84	94	104	112	118	121
(+) D&A	59	71	71	97	128	144	161	182	207	232	237
EBITDA	379	400	413	498	598	683	768	850	927	990	1,015

(−) Tax	1	1	1	1	1	1	1	1	1	1	2
(−) CapEx	123	127	132	155	181	208	234	258	278	292	300
(−) ΔWC	-4	-1	-1	-4	-5	-5	-5	-4	-4	-3	-3
Free Cash Flow (FCFF)	259	273	281	347	421	479	537	595	652	699	716

Terminal Value											14,952
WACC / Discount Rate	7.3%
Long-term Growth Rate	2.5%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5.5	6.5	7.5	8.5	9.5	5
Present Value of FCF	250	246	236	271	306	325	340	351	358	358	7,397

Enterprise Value	10,438
Projection Period	3,041	29.1%
Terminal Value	7,397	70.9%

(−) Current Net Debt	816

Equity Value	9,622
(/) Outstanding Shares	194

Fair Price	$49.52

Sensitivity Analysis

WACC \ Terminal Growth Rate	1.5%	2.0%	2.5%	3.0%	3.5%
5.3%	$71	$80	$92	$109	$136
6.3%	$54	$59	$65	$73	$84
7.3%	$43	$46	$50	$54	$60
8.3%	$35	$37	$39	$42	$45
9.3%	$29	$31	$32	$34	$36

Current price: $10.27. Green = undervalued, Red = overvalued.

Fair Value

$36.08

Market Price

$10.27

Upside / Downside

+251.3%

Verdict

Undervalued

Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Sunstone Hotel Investors, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 3.1% to 17.2% 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 15, DPO 43, DIO 6). At a 7.3% WACC with mid-year discounting, the terminal value (83% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 15.1x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $36.07 per share, suggesting SHO is undervalued by 251.3% at the current price of $10.27.

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

EV/EBITDA Exit Multiple

15.12x

1x – 40x

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	Terminal
Profit Before Tax	270	278	289	339	397	407
(−) Net Interest	50	51	53	62	73	75
(+) D&A	59	71	71	97	128	131
EBITDA	379	400	413	498	598	613

(−) Tax	1	1	1	1	1	—
(−) CapEx	123	127	132	155	181	—
(−) ΔWC	-4	-1	-1	-4	-5	—
Free Cash Flow (FCF)	259	273	281	347	421	—

Peers' EBITDA Multiple						15.1x
Terminal Value						9,268
WACC / Discount Rate	7.29%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5
Present Value of FCF	250	246	236	271	306	6,518

Enterprise Value	7,827
Projection Period	1,308	16.7%
Terminal Value	6,518	83.3%

(−) Current Net Debt	816
Equity Value	7,011
(÷) Outstanding Shares	194M
Fair Price	$36	+251.3%

Sensitivity Analysis

WACC \ EV/EBITDA Exit Multiple	11.1x	13.1x	15.1x	17.1x	19.1x
5.3%	$30	$35	$40	$45	$49
6.3%	$29	$33	$38	$42	$47
7.3%	$27	$32	$36	$41	$45
8.3%	$26	$30	$34	$39	$43
9.3%	$25	$29	$33	$37	$41

Current price: $10.27. Green = undervalued, Red = overvalued.

Based on default parameters

Fair Value

$50.52

Market Price

$10.27

Upside / Downside

+391.9%

Verdict

Undervalued

Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Sunstone Hotel Investors, Inc.'s cash flows over 10 years with analyst estimates for the first 3–5 years, fading toward long-term GDP growth for the remaining years with line-by-line expense modeling. Revenue is projected revenue growing from 3.1% to 5.4% 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 15, DPO 43, DIO 6). At a 7.3% WACC with mid-year discounting, the terminal value (71% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 15.1x to Year 11 EBITDA. After subtracting net debt, the equity value implies a fair price of $50.52 per share, suggesting SHO is undervalued by 391.9% at the current price of $10.27.

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

EV/EBITDA Exit Multiple

15.12x

1x – 40x

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035	Terminal
Profit Before Tax	270	278	289	339	397	456	513	564	608	641	657
(−) Net Interest	50	51	53	62	73	84	94	104	112	118	121
(+) D&A	59	71	71	97	128	144	161	182	207	232	237
EBITDA	379	400	413	498	598	683	768	850	927	990	1,015

(−) Tax	1	1	1	1	1	1	1	1	1	1	—
(−) CapEx	123	127	132	155	181	208	234	258	278	292	—
(−) ΔWC	-4	-1	-1	-4	-5	-5	-5	-4	-4	-3	—
Free Cash Flow (FCF)	259	273	281	347	421	479	537	595	652	699	—

Peers' EBITDA Multiple											15.1x
Terminal Value											15,346
WACC / Discount Rate	7.29%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5.5	6.5	7.5	8.5	9.5	5
Present Value of FCF	250	246	236	271	306	325	340	351	358	358	7,592

Enterprise Value	10,633
Projection Period	3,041	28.6%
Terminal Value	7,592	71.4%

(−) Current Net Debt	816
Equity Value	9,817
(÷) Outstanding Shares	194M
Fair Price	$51	+391.9%

Sensitivity Analysis

WACC \ EV/EBITDA Exit Multiple	11.1x	13.1x	15.1x	17.1x	19.1x
5.3%	$48	$54	$60	$67	$73
6.3%	$44	$49	$55	$61	$67
7.3%	$40	$45	$51	$56	$61
8.3%	$37	$42	$46	$51	$56
9.3%	$34	$38	$42	$47	$51

Current price: $10.27. Green = undervalued, Red = overvalued.

Based on default parameters

Trading Multiples

Fair Value

$2.46

Market Price

$10.27

Upside / Downside

-76.1%

Verdict

Overvalued

Using the industry peer median P/E Multiples multiple (trailing + forward), Sunstone Hotel Investors, Inc. (SHO) has a fair value of $2.46 based on 4 comparable companies in the REIT - Hotel & Motel industry.

P/E Valuation — REIT - Hotel & Motel

USD in millions except Fair Price. Subject company highlighted.

	Mkt Cap ($M)	Trailing P/E	Forward P/E
Sunstone Hotel Investors, Inc.SHO	1,996	242.8x	79.9x
ARMOUR Residential REIT, Inc.ARR	2,070	5.3x	4.5x
DiamondRock Hospitality CompanyDRH	1,911	21.3x	28.7x
Dynex Capital, Inc.DX	1,894	5.2x	—
Xenia Hotels & Resorts, Inc.XHR	1,357	23.0x	84.9x
Industry Median		13.3x	28.7x
(*) Profit after tax		25	25
Equity Value		326	629
(/) Outstanding shares		194	194
Fair Price		$2	$3

Selected Fair Value (avg of trailing + forward)

$2.46

-76.1%

Fair Value

$10.35

Market Price

$10.27

Upside / Downside

+0.8%

Verdict

Undervalued

Using the industry peer median EV/EBITDA multiple (trailing + forward), Sunstone Hotel Investors, Inc. (SHO) has a fair value of $10.35 based on 8 comparable companies in the REIT - Hotel & Motel industry.

EV/EBITDA Valuation — REIT - Hotel & Motel

USD in millions except Fair Price. Subject company highlighted.

	Mkt Cap ($M)	Trailing EV/EBITDA	Forward EV/EBITDA
Sunstone Hotel Investors, Inc.SHO	1,996	13.2x	14.2x
Park Hotels & Resorts Inc.PK	2,093	18.4x	18.1x
ARMOUR Residential REIT, Inc.ARR	2,070	20.7x	—
Global Net Lease, Inc.GNL	2,043	16.7x	18.0x
DiamondRock Hospitality CompanyDRH	1,911	11.0x	11.0x
Dynex Capital, Inc.DX	1,894	20.2x	—
Pebblebrook Hotel TrustPEB	1,446	13.5x	13.8x
Xenia Hotels & Resorts, Inc.XHR	1,357	9.3x	9.7x
Summit Hotel Properties, Inc.INN	473	8.6x	8.4x
Industry Median		15.1x	12.4x
(*) EBITDA		212	197
= Enterprise Value		3,209	2,446
(-) Net Debt		816	816
Equity Value		2,393	1,630
(/) Outstanding shares		194	194
Fair Price		$12	$8

Selected Fair Value (avg of trailing + forward)

$10.35

+0.8%

Fair Value

$8.05

Market Price

$10.27

Upside / Downside

-21.6%

Verdict

Overvalued

Using the industry peer median EV/Revenue multiple (trailing + forward), Sunstone Hotel Investors, Inc. (SHO) has a fair value of $8.05 based on 9 comparable companies in the REIT - Hotel & Motel industry.

EV/Revenue Valuation — REIT - Hotel & Motel

USD in millions except Fair Price. Subject company highlighted.

	Mkt Cap ($M)	Trailing EV/Revenue	Forward EV/Revenue
Sunstone Hotel Investors, Inc.SHO	1,996	2.9x	3.2x
Park Hotels & Resorts Inc.PK	2,093	2.4x	2.4x
ARMOUR Residential REIT, Inc.ARR	2,070	15.3x	76.3x
Global Net Lease, Inc.GNL	2,043	9.0x	9.7x
DiamondRock Hospitality CompanyDRH	1,911	2.7x	2.7x
Dynex Capital, Inc.DX	1,894	27.9x	—
Pebblebrook Hotel TrustPEB	1,446	2.5x	2.6x
Xenia Hotels & Resorts, Inc.XHR	1,357	2.5x	2.6x
eXp World Holdings, Inc.EXPI	942	0.2x	0.2x
Summit Hotel Properties, Inc.INN	473	2.6x	2.5x
Industry Median		2.6x	2.6x
(*) Revenue		960	893
= Enterprise Value		2,474	2,287
(-) Net Debt		816	816
Equity Value		1,657	1,471
(/) Outstanding shares		194	194
Fair Price		$9	$8

Selected Fair Value (avg of trailing + forward)

$8.05

-21.6%

PEG Fair Value

Fair Value

$2.24

Market Price

$10.27

Upside / Downside

-78.2%

Verdict

Overvalued

Using the PEG framework with analyst consensus forward EPS growth of 25.0%, the company has a fair value of $2.24 based on NTM EPS (FY2026) of $0.09. The current PEG ratio is 1.34.

PEG Ratio

1.34Fair Value

01.02.03.0+

PEG = P/E ÷ Growth = 101.0 ÷ 75.2% = 1.34

PEG < 1 = bargain, 1–1.5 = fair, > 2 = expensive.

Growth Category: Fast GrowerPEG moderately applicable

Growth above 25% is capped — hypergrowth may not be sustainable long-term.

Fair Value Calculation

EPS Growth RateForward	75.2%
Adjusted Growth (clamped 8–25%)Clamped	25.0%
Fair P/E	25.0x
NTM EPS (FY2026)	$0.09
Fair Value	$2.24

Growth Analysis

Forward GrowthActive

Period	EPS Est.	Growth	Analysts
FY2025 (actual)	$0.04	—	—
FY2026E	$0.09	+111.4%	5
FY2027E	$0.13	+45.2%	6

2Y Forward EPS CAGR: 75.2%

Historical Growth

Year	Net Income	EPS	YoY
FY2021	$34.3M	$0.16	—
FY2022	$87.3M	$0.34	+112.5%
FY2023	$206.7M	$0.93	+173.5%
FY2024	$43.3M	$0.14	-84.9%
FY2025	$24.6M	$0.04	-69.8%

4Y Historical EPS CAGR: -28.3%

Earnings Power Value

Fair Value

$16.59

Market Price

$10.27

Upside / Downside

+61.5%

Verdict

Undervalued

Using the Earnings Power Value framework with a WACC of 7.3% and normalized earnings of $294.6M, the company has a fair value of $16.59 per share. The EPV range is $13.04 – $21.98 based on WACC sensitivity (5.8% – 8.8%).

Currency: USD Millions

	Low	Selected	High
Normalized Earnings	295	295	295
(/) WACC	8.8%	7.3%	5.8%
Enterprise Value	3,351	4,040	5,087
(-) Net debt	816	816	816
Equity Value	2,535	3,224	4,271
(/) Outstanding shares	194	194	194
Fair Price	$13.04	$16.59	$21.98

Dividend Discount Model

Fair Value

$8.50

Market Price

$10.27

Upside / Downside

-17.2%

Verdict

Overvalued

Using the Two-Stage Dividend Discount Model with a Cost of Equity of 8.5% and projected dividend growth of 15.0%, the fair value is $8.50 per share. The DDM range is $5.81 – $12.96 based on sensitivity analysis across Cost of Equity and growth rate assumptions.

Dividend Profile

Current DPS

$0.30

Dividend Yield

0.00%

Payout Ratio

0.0%

Dividend Coverage

N/A

FCF Payout Ratio0.0%

DPS CAGR (3Y)67.1%

Historical Dividends Per Share

Year	DPS	Payout Ratio	YoY Growth
2025	—	0.0%	-100.0%
2024	$0.30	138.3%	+1.6%
2023	$0.29	28.9%	+148.9%
2022	$0.12	28.4%	+84.4%
2021	$0.06	39.9%	—

Dividend Projections (5-Year)

Year	Projected DPS	Growth	Discount Factor	Present Value
2026	$0.34	15.0%	0.9216	$0.31
2027	$0.39	15.0%	0.8494	$0.33
2028	$0.45	15.0%	0.7828	$0.35
2029	$0.52	15.0%	0.7214	$0.37
2030	$0.59	15.0%	0.6649	$0.39
Terminal Value	$0.61 DPS	2.5%		$6.74

PV of Projected Dividends$1.76

PV of Terminal Value$6.74

Fair Value per Share$8.50

Sensitivity Analysis

Fair value under different Cost of Equity (rows) and DPS Growth Rate (columns) assumptions.

Ke \ Growth	13.0%	14.0%	15.0%	15.0%	15.0%
6.5%	$12	$12	$13	$13	$13
7.5%	$9	$10	$10	$10	$10
8.5%	$8	$8	$9	$9	$9
9.5%	$7	$7	$7	$7	$7
10.5%	$6	$6	$6	$6	$6

Disclaimer: Sweet Value Lab provides estimated intrinsic values for informational purposes only. This is not financial advice. All models rely on assumptions that may not reflect future performance. Always do your own research before making investment decisions.

Sunstone Hotel Investors, Inc. (SHO) Valuation Summary

Updated Apr 6, 2026 22:28

Model	Range	Fair Value	Upside
▸ Discounted Cash Flow
Growth Exit 5Y	$20.48 – $98.56	$35.10	+288.7%
Growth Exit 10Y	$29.44 – $136.05	$49.52	+448.4%
EBITDA Exit 5Y	$24.71 – $49.47	$36.07	+299.5%
EBITDA Exit 10Y	$33.86 – $72.78	$50.52	+459.4%
▸ Trading Multiples
P/E	$0.66 – $2.91	$2.46	-72.8%
EV/EBITDA	$7.84 – $17.81	$10.35	+14.6%
EV/Revenue	$7.96 – $40.44	$8.05	-10.8%
▸ PEG
PEG Fair Value	$2.24 – $2.24	$2.24	-75.2%
▸ Earnings Power Value
Earnings Power Value	$13.04 – $21.98	$16.59	+83.7%
▸ Dividend Discount
Dividend Discount	$5.81 – $12.96	$8.50	-5.8%

Valuation History

DCF Analysis

Fair Value

$35.10

Market Price

$10.27

Upside / Downside

+241.7%

Verdict

Undervalued

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

Terminal Growth

2.50%

0% – 6%

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	Terminal
Profit Before Tax	270	278	289	339	397	407
(−) Net Interest	50	51	53	62	73	75
(+) D&A	59	71	71	97	128	131
EBITDA	379	400	413	498	598	613

(−) Tax	1	1	1	1	1	1
(−) CapEx	123	127	132	155	181	186
(−) ΔWC	-4	-1	-1	-4	-5	-5
Free Cash Flow (FCFF)	259	273	281	347	421	431

Terminal Value						8,996
WACC / Discount Rate	7.3%
Long-term Growth Rate	2.5%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5
Present Value of FCF	250	246	236	271	306	6,328

Enterprise Value	7,636
Projection Period	1,308	17.1%
Terminal Value	6,328	82.9%

(−) Current Net Debt	816

Equity Value	6,820
(/) Outstanding Shares	194

Fair Price	$35.10

Sensitivity Analysis

WACC \ Terminal Growth Rate	1.5%	2.0%	2.5%	3.0%	3.5%
5.3%	$48	$55	$64	$78	$99
6.3%	$37	$41	$46	$52	$61
7.3%	$29	$32	$35	$39	$44
8.3%	$24	$26	$28	$31	$33
9.3%	$20	$22	$23	$25	$27

Current price: $10.27. Green = undervalued, Red = overvalued.

Fair Value

$49.52

Market Price

$10.27

Upside / Downside

+382.1%

Verdict

Undervalued

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

Terminal Growth

2.50%

0% – 6%

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035	Terminal
Profit Before Tax	270	278	289	339	397	456	513	564	608	641	657
(−) Net Interest	50	51	53	62	73	84	94	104	112	118	121
(+) D&A	59	71	71	97	128	144	161	182	207	232	237
EBITDA	379	400	413	498	598	683	768	850	927	990	1,015

(−) Tax	1	1	1	1	1	1	1	1	1	1	2
(−) CapEx	123	127	132	155	181	208	234	258	278	292	300
(−) ΔWC	-4	-1	-1	-4	-5	-5	-5	-4	-4	-3	-3
Free Cash Flow (FCFF)	259	273	281	347	421	479	537	595	652	699	716

Terminal Value											14,952
WACC / Discount Rate	7.3%
Long-term Growth Rate	2.5%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5.5	6.5	7.5	8.5	9.5	5
Present Value of FCF	250	246	236	271	306	325	340	351	358	358	7,397

Enterprise Value	10,438
Projection Period	3,041	29.1%
Terminal Value	7,397	70.9%

(−) Current Net Debt	816

Equity Value	9,622
(/) Outstanding Shares	194

Fair Price	$49.52

Sensitivity Analysis

WACC \ Terminal Growth Rate	1.5%	2.0%	2.5%	3.0%	3.5%
5.3%	$71	$80	$92	$109	$136
6.3%	$54	$59	$65	$73	$84
7.3%	$43	$46	$50	$54	$60
8.3%	$35	$37	$39	$42	$45
9.3%	$29	$31	$32	$34	$36

Current price: $10.27. Green = undervalued, Red = overvalued.

Fair Value

$36.08

Market Price

$10.27

Upside / Downside

+251.3%

Verdict

Undervalued

Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Sunstone Hotel Investors, Inc.'s cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from 3.1% to 17.2% 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 15, DPO 43, DIO 6). At a 7.3% WACC with mid-year discounting, the terminal value (83% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 15.1x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $36.07 per share, suggesting SHO is undervalued by 251.3% at the current price of $10.27.

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

EV/EBITDA Exit Multiple

15.12x

1x – 40x

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	Terminal
Profit Before Tax	270	278	289	339	397	407
(−) Net Interest	50	51	53	62	73	75
(+) D&A	59	71	71	97	128	131
EBITDA	379	400	413	498	598	613

(−) Tax	1	1	1	1	1	—
(−) CapEx	123	127	132	155	181	—
(−) ΔWC	-4	-1	-1	-4	-5	—
Free Cash Flow (FCF)	259	273	281	347	421	—

Peers' EBITDA Multiple						15.1x
Terminal Value						9,268
WACC / Discount Rate	7.29%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5
Present Value of FCF	250	246	236	271	306	6,518

Enterprise Value	7,827
Projection Period	1,308	16.7%
Terminal Value	6,518	83.3%

(−) Current Net Debt	816
Equity Value	7,011
(÷) Outstanding Shares	194M
Fair Price	$36	+251.3%

Sensitivity Analysis

WACC \ EV/EBITDA Exit Multiple	11.1x	13.1x	15.1x	17.1x	19.1x
5.3%	$30	$35	$40	$45	$49
6.3%	$29	$33	$38	$42	$47
7.3%	$27	$32	$36	$41	$45
8.3%	$26	$30	$34	$39	$43
9.3%	$25	$29	$33	$37	$41

Current price: $10.27. Green = undervalued, Red = overvalued.

Based on default parameters

Fair Value

$50.52

Market Price

$10.27

Upside / Downside

+391.9%

Verdict

Undervalued

Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Sunstone Hotel Investors, Inc.'s cash flows over 10 years with analyst estimates for the first 3–5 years, fading toward long-term GDP growth for the remaining years with line-by-line expense modeling. Revenue is projected revenue growing from 3.1% to 5.4% 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 15, DPO 43, DIO 6). At a 7.3% WACC with mid-year discounting, the terminal value (71% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 15.1x to Year 11 EBITDA. After subtracting net debt, the equity value implies a fair price of $50.52 per share, suggesting SHO is undervalued by 391.9% at the current price of $10.27.

FCFF Present Value Calculation

WACC

7.29%

3% – 20%

EV/EBITDA Exit Multiple

15.12x

1x – 40x

Forecast Period

5 Yrs

+ Terminal Year

Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.

Currency: USD Millions

	2026	2027	2028	2029	2030	2031	2032	2033	2034	2035	Terminal
Profit Before Tax	270	278	289	339	397	456	513	564	608	641	657
(−) Net Interest	50	51	53	62	73	84	94	104	112	118	121
(+) D&A	59	71	71	97	128	144	161	182	207	232	237
EBITDA	379	400	413	498	598	683	768	850	927	990	1,015

(−) Tax	1	1	1	1	1	1	1	1	1	1	—
(−) CapEx	123	127	132	155	181	208	234	258	278	292	—
(−) ΔWC	-4	-1	-1	-4	-5	-5	-5	-4	-4	-3	—
Free Cash Flow (FCF)	259	273	281	347	421	479	537	595	652	699	—

Peers' EBITDA Multiple											15.1x
Terminal Value											15,346
WACC / Discount Rate	7.29%

Timing of FCF (mid year)	0.5	1.5	2.5	3.5	4.5	5.5	6.5	7.5	8.5	9.5	5
Present Value of FCF	250	246	236	271	306	325	340	351	358	358	7,592

Enterprise Value	10,633
Projection Period	3,041	28.6%
Terminal Value	7,592	71.4%

(−) Current Net Debt	816
Equity Value	9,817
(÷) Outstanding Shares	194M
Fair Price	$51	+391.9%

Sensitivity Analysis

WACC \ EV/EBITDA Exit Multiple	11.1x	13.1x	15.1x	17.1x	19.1x
5.3%	$48	$54	$60	$67	$73
6.3%	$44	$49	$55	$61	$67
7.3%	$40	$45	$51	$56	$61
8.3%	$37	$42	$46	$51	$56
9.3%	$34	$38	$42	$47	$51

Current price: $10.27. Green = undervalued, Red = overvalued.

Based on default parameters

Trading Multiples

Fair Value

$2.46

Market Price

$10.27

Upside / Downside

-76.1%

Verdict

Overvalued

P/E Valuation — REIT - Hotel & Motel

USD in millions except Fair Price. Subject company highlighted.

	Mkt Cap ($M)	Trailing P/E	Forward P/E
Sunstone Hotel Investors, Inc.SHO	1,996	242.8x	79.9x
ARMOUR Residential REIT, Inc.ARR	2,070	5.3x	4.5x
DiamondRock Hospitality CompanyDRH	1,911	21.3x	28.7x
Dynex Capital, Inc.DX	1,894	5.2x	—
Xenia Hotels & Resorts, Inc.XHR	1,357	23.0x	84.9x
Industry Median		13.3x	28.7x
(*) Profit after tax		25	25
Equity Value		326	629
(/) Outstanding shares		194	194
Fair Price		$2	$3

Selected Fair Value (avg of trailing + forward)

$2.46

-76.1%

Fair Value

$10.35

Market Price

$10.27

Upside / Downside

+0.8%

Verdict

Undervalued

EV/EBITDA Valuation — REIT - Hotel & Motel

USD in millions except Fair Price. Subject company highlighted.

	Mkt Cap ($M)	Trailing EV/EBITDA	Forward EV/EBITDA
Sunstone Hotel Investors, Inc.SHO	1,996	13.2x	14.2x
Park Hotels & Resorts Inc.PK	2,093	18.4x	18.1x
ARMOUR Residential REIT, Inc.ARR	2,070	20.7x	—
Global Net Lease, Inc.GNL	2,043	16.7x	18.0x
DiamondRock Hospitality CompanyDRH	1,911	11.0x	11.0x
Dynex Capital, Inc.DX	1,894	20.2x	—
Pebblebrook Hotel TrustPEB	1,446	13.5x	13.8x
Xenia Hotels & Resorts, Inc.XHR	1,357	9.3x	9.7x
Summit Hotel Properties, Inc.INN	473	8.6x	8.4x
Industry Median		15.1x	12.4x
(*) EBITDA		212	197
= Enterprise Value		3,209	2,446
(-) Net Debt		816	816
Equity Value		2,393	1,630
(/) Outstanding shares		194	194
Fair Price		$12	$8

Selected Fair Value (avg of trailing + forward)

$10.35

+0.8%

Fair Value

$8.05

Market Price

$10.27

Upside / Downside

-21.6%

Verdict

Overvalued

EV/Revenue Valuation — REIT - Hotel & Motel

USD in millions except Fair Price. Subject company highlighted.

	Mkt Cap ($M)	Trailing EV/Revenue	Forward EV/Revenue
Sunstone Hotel Investors, Inc.SHO	1,996	2.9x	3.2x
Park Hotels & Resorts Inc.PK	2,093	2.4x	2.4x
ARMOUR Residential REIT, Inc.ARR	2,070	15.3x	76.3x
Global Net Lease, Inc.GNL	2,043	9.0x	9.7x
DiamondRock Hospitality CompanyDRH	1,911	2.7x	2.7x
Dynex Capital, Inc.DX	1,894	27.9x	—
Pebblebrook Hotel TrustPEB	1,446	2.5x	2.6x
Xenia Hotels & Resorts, Inc.XHR	1,357	2.5x	2.6x
eXp World Holdings, Inc.EXPI	942	0.2x	0.2x
Summit Hotel Properties, Inc.INN	473	2.6x	2.5x
Industry Median		2.6x	2.6x
(*) Revenue		960	893
= Enterprise Value		2,474	2,287
(-) Net Debt		816	816
Equity Value		1,657	1,471
(/) Outstanding shares		194	194
Fair Price		$9	$8

Selected Fair Value (avg of trailing + forward)

$8.05

-21.6%

PEG Fair Value

Fair Value

$2.24

Market Price

$10.27

Upside / Downside

-78.2%

Verdict

Overvalued

Using the PEG framework with analyst consensus forward EPS growth of 25.0%, the company has a fair value of $2.24 based on NTM EPS (FY2026) of $0.09. The current PEG ratio is 1.34.

PEG Ratio

1.34Fair Value

01.02.03.0+

PEG = P/E ÷ Growth = 101.0 ÷ 75.2% = 1.34

PEG < 1 = bargain, 1–1.5 = fair, > 2 = expensive.

Growth Category: Fast GrowerPEG moderately applicable

Growth above 25% is capped — hypergrowth may not be sustainable long-term.

Fair Value Calculation

EPS Growth RateForward	75.2%
Adjusted Growth (clamped 8–25%)Clamped	25.0%
Fair P/E	25.0x
NTM EPS (FY2026)	$0.09
Fair Value	$2.24

Growth Analysis

Forward GrowthActive

Period	EPS Est.	Growth	Analysts
FY2025 (actual)	$0.04	—	—
FY2026E	$0.09	+111.4%	5
FY2027E	$0.13	+45.2%	6

2Y Forward EPS CAGR: 75.2%

Historical Growth

Year	Net Income	EPS	YoY
FY2021	$34.3M	$0.16	—
FY2022	$87.3M	$0.34	+112.5%
FY2023	$206.7M	$0.93	+173.5%
FY2024	$43.3M	$0.14	-84.9%
FY2025	$24.6M	$0.04	-69.8%

4Y Historical EPS CAGR: -28.3%

Earnings Power Value

Fair Value

$16.59

Market Price

$10.27

Upside / Downside

+61.5%

Verdict

Undervalued

Currency: USD Millions

	Low	Selected	High
Normalized Earnings	295	295	295
(/) WACC	8.8%	7.3%	5.8%
Enterprise Value	3,351	4,040	5,087
(-) Net debt	816	816	816
Equity Value	2,535	3,224	4,271
(/) Outstanding shares	194	194	194
Fair Price	$13.04	$16.59	$21.98

Dividend Discount Model

Fair Value

$8.50

Market Price

$10.27

Upside / Downside

-17.2%

Verdict

Overvalued

Dividend Profile

Current DPS

$0.30

Dividend Yield

0.00%

Payout Ratio

0.0%

Dividend Coverage

N/A

FCF Payout Ratio0.0%

DPS CAGR (3Y)67.1%

Historical Dividends Per Share

Year	DPS	Payout Ratio	YoY Growth
2025	—	0.0%	-100.0%
2024	$0.30	138.3%	+1.6%
2023	$0.29	28.9%	+148.9%
2022	$0.12	28.4%	+84.4%
2021	$0.06	39.9%	—

Dividend Projections (5-Year)

Year	Projected DPS	Growth	Discount Factor	Present Value
2026	$0.34	15.0%	0.9216	$0.31
2027	$0.39	15.0%	0.8494	$0.33
2028	$0.45	15.0%	0.7828	$0.35
2029	$0.52	15.0%	0.7214	$0.37
2030	$0.59	15.0%	0.6649	$0.39
Terminal Value	$0.61 DPS	2.5%		$6.74

PV of Projected Dividends$1.76

PV of Terminal Value$6.74

Fair Value per Share$8.50

Sensitivity Analysis

Fair value under different Cost of Equity (rows) and DPS Growth Rate (columns) assumptions.

Ke \ Growth	13.0%	14.0%	15.0%	15.0%	15.0%
6.5%	$12	$12	$13	$13	$13
7.5%	$9	$10	$10	$10	$10
8.5%	$8	$8	$9	$9	$9
9.5%	$7	$7	$7	$7	$7
10.5%	$6	$6	$6	$6	$6