SBA Communications (SBAC)

Total return at 5 years: 9.8%/year = 7.0% appreciation + 2.8% dividend. The target price ($259) is ex-dividend; the $30 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $332 · Multiples $234) exceeds the market price ($184).

Today — fairly valued: at $184 trades ~21.1% below its value discounted to today (~$234); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($259) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$148.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($184) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-8.1%/year) than we project (4.5%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.8 bn of owner earnings in year 5 (vs ~$1.6 bn of our base case). It recalculates if the DCF assumptions are edited.

A REIT is valued on price/Core-FFO (not P/E: the accounting depreciation of the property is not an economic cost). ⚠️ The real cash is AFFO (owner earnings), substantially lower than Core FFO —it subtracts recurring capex and non-cash straight-line rent—, and the dividend consumes almost all of the AFFO. It returns capital via dividend; it may issue equity to fund development. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

SBA is a communications tower REIT (not a traditional real estate one): its flow metric is AFFO (adjusted funds from operations), not FFO adjusted for property revaluation or traditional occupancy. Year 1 (2026) anchors to the guidance in the release of 3-Aug-2026 —total revenue US$2,841-2,886 million and AFFO per share US$11.95-12.40—, almost flat against the level of the last twelve months on the already-quantified churn from Sprint (consolidation with T-Mobile) and EchoStar (payment default after shutting down its network). From year 2 the path recovers its pace as that churn runs out and the more than 7,000 sites acquired from Millicom in Central America mature, up to durable high-single-digit growth by year 5, consistent with an infrastructure REIT with a wide moat but not yet the scale of AMT or CCI. The share count falls year over year on sustained net buybacks (~0.8%/year in the base case, calibrated on the historical FY22-TTM reduction); the dividend grows faster than aggregate AFFO on the combined effect of fewer shares and the company's policy of sustaining the highest dividend growth in the industry.

Today's multiple compresses on its own going forward as the metric per share grows. The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $259 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $184, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $259 in 5 years plus $30 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $234. Against the current market price ($184), the margin of safety is 21.1% (trades below the maximum → there is margin) and the total return at that price would be 9.8% annually.

• Entry multiple. The current P/AFFO reflects the 2026 transition year; the base-case exit multiple (17x) sits at the center of the tower REIT band.
• 5-year return. +10% of annual total return at market price in the base case, including the dividend.
• Margin of safety. It trades close to intrinsic value, far from the required margin of safety.
• Sensitivity to the terminal multiple. The result depends on the moat sustaining a multiple of at least 15x (the band floor); below that, the market would be signaling structural decline, not transition.

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (122%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on invested capital. 15.0%, above the 10% bar, although invested capital already carries years of debt-funded buybacks that reduce book equity.
• Cash predictability. AFFO covers the dividend with room to spare (payout near 41%), leaving margin to keep growing it even in the 2026 transition year.
• Reinvestment runway. The Millicom acquisition and the right to build up to 2,500 additional towers in Central America provide a concrete international growth runway beyond the mature domestic business.
• Earnings quality. Net income includes non-recurring gains from remeasuring intercompany foreign-currency loans; AFFO, the valuation metric, excludes them.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

SBA does not report occupancy or same-store NOI in the sense of a traditional real estate REIT: its density KPI is average tenants per tower (1.8 at year-end 2025). The drivers shown — share count reduction from buybacks, dividend growth, and the trajectory of approximate adjusted EBITDA — better reflect the capital allocation discipline of a tower REIT than the occupancy metrics of a conventional real estate REIT.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• 2026 guided growth. Nearly flat due to already-quantified churn from Sprint and EchoStar; the company explicitly discloses this in its site-leasing revenue bridge.
• Recovery from 2027 onward. Millicom's maturation and the end of known churn sustain a recovery path toward durable high-single-digit growth by year 5.
• International engine. International revenue grew 7.7% at constant currency in 2025, with the Brazilian real's devaluation acting as a headwind on the reported figure.
• Domestic engine. Domestic revenue grew just 0.2% in 2025 and fell 3.7% year-over-year in the second quarter of 2026 due to already-underway churn.

• Contractual recurrence. 5- to 15-year contracts with multiple tenant-option renewals sustain predictable revenue even in the 2026 transition year.
• Client concentration. The three major domestic carriers account for 66.5% of total revenue; further consolidation would weigh disproportionately on revenue.
• Operating scalability. Adding a second or third tenant to an already-built tower carries low incremental cost, which sustains a tower cash flow margin above 79%.
• Geographic diversification. The international business (25% of revenue) reduces dependence on the mature domestic market, though it introduces currency risk in Brazil, Chile, and South Africa.
• Nature of the secondary business. Site development (8.7% of revenue) is transactional and low-capital, ancillary to the core leasing business, with no material weight in the valuation.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Portfolio quality (occupancy + same-store NOI)Occupancy 180.0% · same-store NOI +7.7%
• ✓Dividend coverage (payout over AFFO)41% of AFFO

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. 6.4x net debt to annualized adjusted EBITDA, at the center of the company's own target range (6.0x-7.0x), with 21.1% of debt at a variable rate tied to SOFR.
• Credit rating. Recent upgrade to BBB by S&P following the first investment-grade bond issuance (US$3,500 million), reducing the cost of future debt.
• Liquidity. New US$2,500 million unsecured revolving credit facility, undrawn as of the release date, plus US$0.4bn of cash and short-term investments.
• Negative equity. Stockholders' equity is negative (-US$4,630 million), the result of years of buybacks funded with SBA's own AFFO and debt; it is a structural feature of the sector, not a solvency signal given the cash flow.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Continuity. The current CEO comes from more than a decade as the same company's chief financial officer, providing continuity to already-established capital discipline.
• Allocation discipline. 45.6% of deployed capital to dividends and 33.3% to buybacks over the trailing twelve months, funded with the company's own AFFO without incremental leverage.
• Ownership alignment. Ownership by directors and executives as a group is low (less than 1%), without an active controlling shareholder to align long-term incentives beyond compensation.
• Debt management. The first investment-grade bond issuance and the upgrade to BBB reflect proactive management of the debt profile toward cheaper, unsecured instruments.

• Already-quantified churn from Sprint and EchoStar leaves 2026 guidance nearly flat, and the market appears not to clearly distinguish that one-off effect from structural deterioration of the domestic portfolio
• Leverage (6.4x net debt to annualized adjusted EBITDA) generates caution in a higher-rate environment, even with the recent upgrade to BBB and the company's first investment-grade bond
• Sector rotation away from communications infrastructure REITs after several years of weak relative performance versus the broader market

Fairly valued: the current price appears to anchor the 2026 transition year without sufficiently crediting the recovery the company itself guides from 2027.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +5%/year (+28% total): the margin of safety protects the downside. The bull (+14%/year, +90% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Client concentration. 66.5% of total revenue depends on three domestic carriers.
• Already-quantified churn. Sprint and EchoStar generate a known impact of up to US$176 million in 2026 between domestic and international.
• Currency risk. 25% of revenue comes from international operations, with direct exposure in Brazil, Chile, and South Africa.
• Refinancing risk. Guidance assumes refinancing of the 2021-1C secured notes at 5.25% without a specific plan yet as of the release date.
• Competitive pressure. The rise of alternative installations makes it marginally easier to relocate antennas and pressures renewal terms.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 15% above the 10% bar, but the margin is limited (+21%) → excellent business at a fair price.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 5% at a multiple/growth of 3.4 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts -8% vs our 5%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +2%/yr, bull-scenario ceiling +11%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: efficient scale, intangibles, cost advantage, switching costs, network effects → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -8%, within what we project (5%) — the story squares with the numbers.