SmartCentres REIT (TSX:SRU.UN): Assessing Valuation as Redevelopment and Stable Income Attract Investor Interest

Recent coverage around SmartCentres Real Estate Investment Trust (TSX:SRU.UN) is turning heads, as its Walmart anchored properties keep occupancy near full while redevelopment projects quietly reshape the REIT into a longer term income and growth story.

See our latest analysis for SmartCentres Real Estate Investment Trust.

At around CA$25.23, the recent slide in SmartCentres’ 1 month share price return contrasts with a steadier year to date gain and a respectable 1 year total shareholder return. This suggests sentiment is cooling slightly even as the income and redevelopment story appears to be firming up.

If SmartCentres has you rethinking how you balance income and growth, it could be a good moment to broaden your search and discover fast growing stocks with high insider ownership

With the units trading below both analyst targets and some intrinsic value estimates, yet backed by near full occupancy and redevelopment upside, is SmartCentres quietly undervalued, or is the market already pricing in its next phase of growth?

Price-to-Earnings of 14x: Is it justified?

At a last close of CA$25.23, SmartCentres trades on a 14x price to earnings multiple, which screens as inexpensive against both peers and the wider Retail REITs industry.

The price to earnings ratio compares the current unit price to the trust's earnings per unit, making it a useful shorthand for how much investors are willing to pay for each dollar of profit. For a mature, income focused REIT such as SmartCentres, this metric is especially relevant, as it reflects expectations for sustainable earnings rather than speculative growth.

With SmartCentres highlighted as good value versus the North American Retail REITs industry average multiple of 23.1x, and also looking cheap relative to a peer average of 32.9x, the current 14x multiple suggests the market may be underpricing the trust's earnings power and recent profit recovery. This comparatively low multiple stands alongside our DCF estimate of fair value at CA$35.66, indicating there could be room for the valuation to converge upward if confidence in earnings durability and redevelopment potential continues to build.

Compared with an industry on more than 23x earnings and peers above 30x, SmartCentres' 14x price to earnings ratio appears comparatively restrained, which indicates that investors are paying a notable discount for similar, or potentially improving, fundamentals.

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

Result: Price-to-Earnings of 14x (UNDERVALUED)

However, persistent interest rate uncertainty and any slowdown in Canadian retail spending could pressure asset values and test the resilience of SmartCentres' earnings.

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

Another View: What Our DCF Model Suggests

Our DCF model points to a fair value of about CA$35.66 for SmartCentres, implying the current CA$25.23 price is materially undervalued. If cash flows prove more volatile than expected, that gap could narrow fast. Is this a clear opportunity or a value trap in disguise?

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 SmartCentres 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 908 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 SmartCentres Real Estate Investment Trust Narrative

If you see the numbers differently or prefer your own research driven view, you can build a personalized SmartCentres narrative in just minutes: Do it your way

A great starting point for your SmartCentres Real Estate Investment Trust research is our analysis highlighting 3 key rewards and 2 important warning signs 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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