STAG Industrial, Inc. (STAG) stock intrinsic value fair value estimate & owner earnings analysis

STAG Industrial is a real estate investment trust that owns 538 single-tenant industrial buildings (about 120 million square feet) across the United States and collects rent from warehouse, distribution and light-manufacturing tenants. Same-store occupancy was 97.5% at the end of 2025. How we measured earnings. We start from operating cash flow and remove year-to-year swings in receivables, payables and tenant deposits, then subtract stock-based pay and the part of capital spending that is needed to keep the buildings leased. Money spent buying new buildings is treated as growth and excluded. Capitalized leasing commissions stay in as a real recurring cost. On this basis owner earnings per share were about $1.70 in 2021, $1.50 in 2022, $1.57 in 2023, $1.47 in 2024 and $1.33 in 2025. The 2021-2025 median is $1.50. That period predates much of the recent rise in borrowing costs, so we do not use $1.50 as the starting level. We start from the 2025 level of $1.33. Why earnings fell in 2025 and what we assume next. Owner earnings per share fell about 9% in 2025. Operating cash flow was flat, but cash paid for building additions and improvements (including development) rose about $54 million and cash interest paid rose about $19 million, to $127.7 million. Our base case assumes no further decline in 2026, rather than another 9% drop. The reason is that the drop was driven by a step-up in capital additions and interest cost, and the first-quarter 2026 report shows operating cash flow of $117.4 million versus $103.5 million a year earlier, with building additions lower ($41.3 million versus $46.3 million). That is one quarter, so we credit flat earnings and no rebound. Base case: about $26 per share. Growth credited is limited to what the existing leases and the existing portfolio produce. Leases that started in 2025 covered 14.4 million square feet and reset cash rents 24.0% higher (new leases +30.2%, renewals +22.1%), and same-store lease income grew 5.2%. Rent from buildings already owned is the growth in the bag here. We credit 3% a year for five years (below the 5.2% demonstrated, because refinancing will absorb part of it), then 2% for two years and 1% for two years, and hold earnings flat after year 10 because well-leased, maintained buildings keep producing rent. We do not credit further building purchases: they are paid for with new shares and debt, and buying at prices near what the buildings are worth adds little value to a current shareholder. Refinancing is the main headwind: debt of $3.27 billion carries a 4.21% average rate, while notes issued in 2025 priced at 5.50% to 5.99%. Repricing all of it would cost roughly $0.26 per share a year over the next several years; the base-case growth is net of that. Bear case: about $18 per share. Owner earnings drop again in 2026 to about $1.20 (a repeat of the 2025 decline), then shrink 2% a year for four years as debt refinances at the higher 2025 rates, occupancy slips below today's 97.5%, and the large 2025 rent increases on renewal are not repeated, then 1% a year for five years, and flat after that. The company does carry meaningful leverage (net debt of 38% of real estate cost), which is why this case is meaningfully lower. Bull case: about $31.50 per share. Owner earnings reach about $1.40 in 2026, then grow 5% a year for five years, in line with the 4.7% to 5.2% same-store growth reported for 2025, then 3.5% a year for four years, and are flat thereafter. All three cases are equity values based on cash flow after interest, so debt is not deducted again, and no balance-sheet cash is added. Value does not fall to zero in any case. What would make this wrong. We tested our assumption that rent growth continues against the 2025 filing: same-store occupancy slipped from 97.7% to 97.5% and vacancies reduced same-store rent by about $6.4 million, so rising vacancies rather than rents are the more likely path to a lower value. On the other side, some of the 2025 building additions relate to development and expansion, which we cannot separate in the filings; if that spending is discretionary, true owner earnings would be higher than we show. The share count has risen about 2 to 3% a year, so our per-share figures assume no further dilution beyond the acquisitions we exclude. The margin-of-safety price is around $15 per share, well below the base-case value, to leave room for the downside case and the refinancing risk.