Assessing Freehold Royalties (TSX:FRU) Valuation After Insider Buying and Executive Restructuring

Freehold Royalties (TSX:FRU) is back on investors radar after senior officer Lisa Farstad bought 7,000 shares and the company moved ahead with executive reshuffling, including scrapping the Chief Operating Officer role.

See our latest analysis for Freehold Royalties.

Those moves come as Freehold Royalties trades at CA$15.24, with a 1 month share price return of 8.78% and a 1 year total shareholder return of 21.32%, suggesting positive momentum is steadily building behind the story.

If insider buying has you thinking about where else management conviction and royalty like cash flows might show up, now is a good time to explore fast growing stocks with high insider ownership.

With insiders buying, earnings steady, and the share price closing in on analyst targets, investors now face a key question: is Freehold still trading below its long term potential, or is the market already pricing in the next leg of growth?

Price-to-Earnings of 19.4x: Is it justified?

On a price-to-earnings basis, Freehold Royalties trades at 19.4 times earnings, which screens as good value versus its own peer group.

The price-to-earnings ratio compares what investors pay today to each dollar of current earnings, making it a straightforward gauge of how optimistic the market is about a company’s profit power.

For Freehold Royalties, a 19.4x multiple looks undemanding relative to a peer average of 28.8x. This hints that the market is assigning a discount. However, when lined up against the broader Canadian Oil and Gas industry average of 15.3x, that same multiple looks richer. This suggests investors are still paying a premium versus the sector even if the stock is modestly priced against its closest comparables.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-earnings of 19.4x (ABOUT RIGHT)

However, investors should still weigh softer revenue trends and the stock’s shrinking discount to analyst targets, which could limit upside if growth underwhelms.

Find out about the key risks to this Freehold Royalties narrative.

Another View: DCF Points to Deeper Value

While the earnings multiple suggests Freehold Royalties is roughly fairly priced, our DCF model tells a different story. With shares at CA$15.24 versus our fair value estimate of CA$42.47, it implies the market could be heavily discounting long term royalty cash flows. Is this a value trap or a patient investor’s opportunity?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Freehold Royalties for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 906 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Freehold Royalties Narrative

If you would rather dig into the numbers yourself and shape a view that fits your thesis, you can build your own narrative in just a few minutes: Do it your way.

A great starting point for your Freehold Royalties research is our analysis highlighting 1 key reward and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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