Is Primaris REIT Poised for Growth After Recent 2% Stock Uptick?

If you are eyeing Primaris Real Estate Investment Trust and wondering whether to buy, hold, or move on, you are not alone. Even seasoned investors have been taking a fresh look at this REIT lately, considering both the company’s unique position in the evolving retail property market and its intriguing valuation story. Over the last month, Primaris’s stock has ticked up 2.0%, while the past week has seen a steady 1.7% rise. Though this year’s performance is still slightly negative at -0.8%, zooming out to a three-year view gives us a very different picture, with a total return of 33.8%. Flat results over the past year suggest the market may be reassessing its expectations or simply waiting for the next catalyst.

The recent, steady gains seem to reflect a shift in how investors perceive retail real estate risk. There is more optimism around the resilience of well-located retail assets, especially as broader economic conditions remain relatively stable. This sets the stage for a real debate about whether Primaris’s current price makes it a smart value play, given its potential for future growth.

On an initial run through the numbers, Primaris earns a valuation score of 4 out of 6. This means it looks undervalued on most of the key metrics experts care about. In the sections ahead, I will break down what this score really means using several different valuation approaches. Stick with me, because I will also share what I believe is the smartest way to interpret all this valuation data by the end of the article.

Why Primaris Real Estate Investment Trust is lagging behind its peers

Approach 1: Primaris Real Estate Investment Trust Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates the value of a company by projecting its future cash flows and discounting them back to their present value using an appropriate rate. For Primaris Real Estate Investment Trust, the DCF is based on adjusted funds from operations, which provides a more accurate picture of cash available to shareholders after accounting for key expenses.

Currently, Primaris generates CA$125.3 million in free cash flow. Analysts expect this to grow steadily over time, with projections reaching CA$186.2 million by the end of 2027. Simply Wall St extends these forecasts further and estimates free cash flows could climb to approximately CA$276.9 million by 2035, with the growth rate gradually slowing as the business matures. All figures are in Canadian dollars.

Based on these projections and discounting them back to today, the DCF model calculates an intrinsic fair value of CA$31.64 per share. This implies the stock is trading at a 51.4% discount to its estimated intrinsic value, signifying a substantial margin of safety.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Primaris Real Estate Investment Trust.

Our Discounted Cash Flow (DCF) analysis suggests Primaris Real Estate Investment Trust is undervalued by 51.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Primaris Real Estate Investment Trust Price vs Earnings

For profitable real estate investment trusts like Primaris, the price-to-earnings (PE) ratio is a well-recognized way to judge valuation. It helps investors see how much they are paying for each dollar of the company's earnings. This measure is especially useful when a company's profits are steady. The PE ratio is a trusted benchmark in determining whether the stock trades at a reasonable level compared to its earnings power.

Growth expectations and risk play a significant role in shaping what is considered a fair PE ratio. Companies expected to grow quickly or those with more resilient business models tend to justify higher PE ratios. In contrast, slower-growing or riskier firms usually trade at a lower PE.

Primaris currently trades at a PE of 22.6x, which is notably higher than both the Retail REIT industry average of 16.3x and the peer group average of 17.1x. This premium might indicate the market anticipates above-average growth or sees lower risk in Primaris compared to its rivals.

Simply Wall St’s proprietary “Fair Ratio” for Primaris is 22.8x. This figure goes beyond simple industry or peer comparisons by factoring in the company’s individual earnings growth outlook, profit margins, market capitalization, and risk profile. Because the Fair Ratio customizes expectations to Primaris’s unique story, it is a more nuanced way to decide if the shares are attractively priced.

Comparing the actual PE of 22.6x with the Fair Ratio of 22.8x, the difference is minimal. This means investors are paying roughly what would be expected given the REIT’s growth prospects and risk. In short, Primaris appears fairly valued on this basis.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Primaris Real Estate Investment Trust Narrative

Earlier we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your own story and your perspective about a company, connecting the numbers you believe in (like fair value and future forecasts) to a bigger picture about where the business is heading. Narratives take Primaris’s data and weave it into a financial forecast and fair value based on your viewpoint, helping you clearly see the “why” behind buy or sell decisions.

Narratives are simple, accessible tools available on Simply Wall St’s Community page, where millions of investors share their perspectives. Investors use Narratives to reveal if Primaris is undervalued or overpriced by directly comparing their calculated Fair Value with today’s Price and updating their forecasts each time news or earnings emerge. For Primaris, this means one investor might see a high fair value because they expect strong growth and resilient rental demand, while another foresees a much lower fair value if they are concerned about retail sector headwinds. Narratives make it easy to understand and act on these differences, keeping your investment decisions dynamic and informed.

Do you think there's more to the story for Primaris Real Estate Investment Trust? Create your own Narrative to let the Community know!

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