Pro Real Estate Investment Trust (TSE:PRV.UN), which is in the reits business, and is based in Canada, received a lot of attention from a substantial price increase on the TSX over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Pro Real Estate Investment Trust’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What’s the opportunity in Pro Real Estate Investment Trust?
The share price seems sensible at the moment according to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.89x is currently trading slightly above its industry peers’ ratio of 7.73x, which means if you buy Pro Real Estate Investment Trust today, you’d be paying a relatively sensible price for it. And if you believe that Pro Real Estate Investment Trust should be trading at this level in the long run, then there should only be a fairly immaterial downside vs other industry peers. So, is there another chance to buy low in the future? Given that Pro Real Estate Investment Trust’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Pro Real Estate Investment Trust?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Pro Real Estate Investment Trust’s revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in PRV.UN’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at PRV.UN? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?
Are you a potential investor? If you’ve been keeping tabs on PRV.UN, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for PRV.UN, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Pro Real Estate Investment Trust. You can find everything you need to know about Pro Real Estate Investment Trust in the latest infographic research report. If you are no longer interested in Pro Real Estate Investment Trust, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.