Is Public Storage (PSA) Trading at a Discount Amid Earnings Growth and Mixed Analyst Sentiment?

The question of whether Public Storage (PSA) is trading at a discount to its intrinsic value hinges on a nuanced interplay of valuation metrics, sector positioning, and debt dynamics. As a self-storage REIT with a dominant market share, PSA has shown resilience in earnings growth, yet its valuation multiples and leverage ratios raise critical questions for value investors.

Valuation Metrics: A Premium to the REIT Sector

Public Storage's current Price-to-Funds-from-Operations (P/FFO) ratio stands at 16.39, significantly above the REIT sector's average of 13.5x as of October 2025 according to Seeking Alpha. Similarly, its forward Price-to-Earnings (P/E) ratio of 25.84 exceeds the REIT sector's average forward P/E of 15.65 as per Macromicro. These metrics suggest PSA is trading at a premium to its peers, even as the broader REIT sector has seen valuation multiples contract in 2026. For context, the self-storage sub-sector, where PSA operates, had a lofty LTM FFO multiple of 28.28x in 2025 as reported by Multi-Housing News, but this has since moderated. While PSA's P/FFO of 16.39 is lower than its 2025 peak, it remains elevated relative to the sector's 2026 trajectory.

Analysts appear to share this optimism. The average price target of $316.75 implies an 18.36% upside from the current stock price of approximately $272.60 according to Robinhood. Notably, institutions like Wells Fargo and Truist have set targets above $315, while Morgan Stanley's $290 estimate reflects a more cautious stance as per StockAnalysis. This divergence underscores mixed sentiment but leans toward a bullish outlook.

Earnings Growth and Operational Leverage

PSA's Q3 2025 results highlight its earnings resilience. The company reported $4.31 per share in core FFO, surpassing estimates by $0.07. For 2025, it raised its core FFO guidance by nearly 1%, driven by strong same-store and non-same-store NOI growth. Looking ahead, management anticipates $130 million in incremental NOI from assets stabilized post-2025, signaling potential for 2026 growth as stated in earnings call. Additionally, cost-cutting initiatives-such as a 30% reduction in labor hours via AI-driven staffing-further bolster margins as noted in earnings transcript.

However, revenue growth has been uneven. Q3 2025 revenue fell 5.4% year-over-year to $1.22 billion, though this was offset by beating analyst expectations. This dip raises questions about the sustainability of top-line growth in a competitive self-storage market.

Debt Concerns: A Looming Risk

While earnings growth is compelling, PSA's debt-to-EBITDA ratio of 19.84x according to ReitNotes is a stark outlier. The REIT sector's average debt-to-EBITDA ratio hovers between 4.3x and 5.48x as reported by FullRatio, with even the more leveraged REIT - Office sub-sector at 8.72x according to FullRatio. PSA's leverage is nearly four times the sector average, exposing it to refinancing risks in a high-interest-rate environment. This imbalance could erode value if borrowing costs rise or if economic conditions weaken.

Sector Positioning and Value Investing Criteria

From a value investing perspective, PSA's premium valuation multiples and elevated debt load challenge its appeal. Value investors typically seek securities trading below intrinsic value, often identified through low P/E, P/FFO, and conservative leverage. PSA's metrics fail to meet these criteria. However, its earnings growth and strategic cost controls could justify a premium if the market anticipates continued outperformance.

The broader REIT sector's forward P/E of 15.65 as per Macromicro and P/FFO contraction to 13.5x according to Seeking Alpha suggest that PSA's valuation is not entirely out of step with industry trends. J.P. Morgan Research forecasts FFO growth of 3% in 2025 and 6% in 2026 as reported by JPMorgan, implying that the sector's fundamentals remain intact. For PSA, the key will be whether its operational improvements and NOI growth can outpace its debt burden.

Conclusion: A Premium with Conditional Justification

Public Storage is not trading at a traditional discount to its intrinsic value. Its valuation multiples are above sector averages, and its debt load is a significant risk. However, the company's earnings growth, operational efficiency, and analyst optimism suggest that the market is pricing in future performance rather than current fundamentals. For value investors, PSA may warrant consideration only if its debt profile improves and its growth trajectory exceeds expectations. Until then, the stock appears more aligned with growth-oriented strategies than value investing principles.