DEA

We rate Easterly Government Properties, Inc. (DEA) as a Hold with a composite score of 53.4/100 at a current price of $23.39. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (79th percentile) and quality (46th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (30th percentile) and stability (34th percentile) tempers our overall conviction. We assign a No Moat rating (31/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Easterly Government Properties, Inc. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 53.4/100 places it at rank #1466 in our full 7,333-stock universe. At $1.0B in market capitalization, Easterly Government Properties, Inc. is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 13% and favorable momentum (79th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 77% (+0.5pp vs sector) narrow to operating margins of 25% (+8.4pp vs sector) and net margins of 4.4%, yielding a gross-to-net conversion rate of 6%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $23.39, Easterly Government Properties, Inc. is trading near fair value based on current fundamentals. Our value factor score of 45/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 80.0x (a 571% premium to the sector median of 11.9x), EV/EBITDA of 14.5x (at a premium), P/B of 0.8x, P/S of 3.4x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to Easterly Government Properties, Inc.. The stock presents a balanced risk profile: significant leverage (118% debt-to-equity) and below-average price stability (34th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (118% debt-to-equity); below-average price stability (34th percentile); low beta of 0.62 — while defensive, this may indicate limited upside participation in bull markets; elevated valuation multiple (P/E 80.0x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 34th percentile and quality factor at the 46th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 77% provide a buffer against cost pressures; a 9.70% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Easterly Government Properties, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (1.0%), weak asset returns (ROA 0.4%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Easterly Government Properties, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Easterly Government Properties, Inc. receives a Hold rating with a composite score of 53.4/100 (rank #1466 of 7,333). Our quantitative framework assigns a No Moat (31/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 47/100.

Our analysis supports a neutral stance on Easterly Government Properties, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.