EPR Properties (EPR 0.82%), a relatively small real estate investment trust, or REIT, was outperforming the stock market during most of 2022. However, in the latter half of the year, the parent company of one of its largest tenants, Regal Entertainment, filed for bankruptcy protection, and the stock plunged by about 40% from the highs.

However, Wall Street hasn't given up on EPR even if investors are nervous. In fact, some of the most respected firms see lots of upside potential for this beaten-down, high-yield REIT. Raymond James recently named EPR a top pick among net lease REITs, and JPMorgan Chase recently put a $52 price target on the stock, implying more than 50% upside from the current price.

To be sure, there are some short-term headwinds investors should be aware of before considering EPR. So, here's a quick overview of what the company does, its long-term potential, and key risk factors.

What does EPR Properties do?

EPR Properties is a REIT that focuses on businesses that sell experiences as opposed to physical products. Think of businesses like golf attractions and ski resorts (Topgolf and Vail Resorts are both EPR tenants), water parks, and eat-and-play businesses. EPR buys the real estate occupied by these types of businesses and then leases it to their occupants.

EPR's top property type, and the reason for its recent stock underperformance, is movie theaters, which made up 46% of the company's rent before the COVID-19 pandemic. Its largest tenant is AMC Entertainment, with Regal also among its top three. As of the latest available information, EPR owns 173 movie theaters out of 282 total experiential properties, and the company also has a portfolio of education properties that it has been reducing in recent years.

As a REIT, EPR distributes the majority of its income to investors, and because of its depressed share price, it has a very handsome 8.8% dividend yield. It pays in monthly installments, and the annual payout represents just 72% of its earnings, which is a rather low payout ratio for a REIT.

A high-potential market opportunity and lots of financial flexibility

After pausing growth for a couple years due to the COVID-19 pandemic, EPR has recently started pursuing growth opportunities again. Through the first three quarters of 2022, EPR spent $321 million on property acquisitions, with another $250 million in committed spending on development over the next two years. In all, EPR sees a $100 billion market size of properties it could pursue.

The company has the financial flexibility to take advantage of opportunities it sees. It has a $1 billion untouched credit line and more than $160 million in cash. And if that wasn't enough, EPR is generating enough cash flow to keep paying its dividend and fund the $250 million in committed spend without raising any additional capital through equity or debt.

The movie theater portfolio could weigh on the stock for a while

To be perfectly clear, I'm not terribly worried about EPR's movie theater exposure (which the company is actively trying to diversify away from). For starters, EPR's theaters tend to be higher-end properties, such as newer megaplex cinemas located in high-traffic areas. So, even through a bankruptcy restructuring, these are the types of theaters operators want to keep open -- in fact, in its third-quarter earnings release, EPR confirmed that Regal had paid rent on all 57 of its EPR-owned theaters in October and November. Plus, the recent box office success of movies like Avatar: The Way of Water are encouraging for the long-term viability of movie theaters.

Having said that, the theater portfolio could certainly act as a short-term headwind to the stock, especially while the Regal bankruptcy proceedings are ongoing. So, while I hope the analysts are correct and we see a rally in the stock in the near term, I own EPR because I think it will be a great long-term, market-beating investment. Not only does EPR have lots of upside potential as the theater business normalizes, but it has tons of room for value-adding growth, as well as a high, well-covered dividend.