InterRent REIT (TSX:IIP.UN): Assessing Valuation After Swing to Profitability in Latest Results

InterRent Real Estate Investment Trust (TSX:IIP.UN) released third-quarter and year-to-date results, swinging from a net loss last year to positive net income. This turnaround underscores a shift in the company’s operating performance.

See our latest analysis for InterRent Real Estate Investment Trust.

After swinging back into profitability, InterRent’s latest results appear to have set a more positive tone among investors. The stock’s year-to-date share price return is an impressive 30.2%, and its 1-year total shareholder return of 27.68% suggests building momentum as confidence improves around its recovery.

If InterRent’s rebound caught your attention, now is a good time to broaden your horizons and discover fast growing stocks with high insider ownership

With shares climbing and operational results on the mend, the key question now is whether InterRent is trading at a bargain, or if the market has already priced in all of its future growth potential. Could there still be a buying opportunity?

Price-to-Sales of 7.4x: Is it justified?

InterRent trades at a price-to-sales ratio of 7.4, which means shares are priced much higher than both the industry and its own fair ratio benchmarks.

The price-to-sales multiple measures how much investors are willing to pay for each dollar of InterRent’s revenue. In real estate investment trusts, a lower price-to-sales ratio typically signals good value, while a higher one implies high expectations for future growth or profitability.

Currently, InterRent’s 7.4x ratio is almost double the North American Residential REITs industry average of 4.9x and exceeds the estimated fair ratio of 3.8x. This places its valuation well above sector peers and the level the market might eventually revert to. This suggests that the company’s growth profile or recent momentum could be supporting a premium pricing.

Explore the SWS fair ratio for InterRent Real Estate Investment Trust

Result: Price-to-Sales of 7.4x (OVERVALUED)

However, limited revenue growth and the possibility of a market pullback could challenge InterRent’s strong share price momentum in the future.

Find out about the key risks to this InterRent Real Estate Investment Trust narrative.

Another View: What Does the SWS DCF Model Say?

While the price-to-sales ratio paints InterRent as overvalued, our DCF model tells a slightly different story. According to this approach, shares are trading just above the estimated fair value of CA$12.76. This means the stock is not deeply discounted, but also not extravagantly overpriced. Could this closer valuation signal less room for upside, or is the market anticipating more growth than current figures suggest?

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 InterRent Real Estate Investment Trust 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 904 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 InterRent Real Estate Investment Trust Narrative

If you think there’s more to uncover or want to interpret the numbers yourself, you can easily put together your own view of the story in just a few minutes. Do it your way

A great starting point for your InterRent Real Estate Investment Trust research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

Smart investors don't settle for just one opportunity. Maximize your edge by tapping into unique stock ideas that others might overlook. Don't miss the next breakout move.

• Boost your returns with steady income by targeting market leaders paying reliable yields, starting with these 18 dividend stocks with yields > 3%.
• Ride the wave of innovation and capture early gains in next-generation technology by checking out these 27 AI penny stocks.
• Uncover hidden value potential and position yourself for upside by scrutinizing these 904 undervalued stocks based on cash flows based on company cash flows.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com