At UK£1.28, Is It Time To Put Sirius Real Estate Limited (LON:SRE) On Your Watch List?

While Sirius Real Estate Limited (LON:SRE) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the LSE over the last few months. Less-covered, small caps tend to present more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Sirius Real Estate’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Sirius Real Estate

What is Sirius Real Estate worth?

Great news for investors – Sirius Real Estate is still trading at a fairly cheap price according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Sirius Real Estate’s ratio of 10.54x is below its peer average of 18.39x, which indicates the stock is trading at a lower price compared to the Real Estate industry. Another thing to keep in mind is that Sirius Real Estate’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its industry peers, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

Can we expect growth from Sirius Real Estate?

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. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 2.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Sirius Real Estate, at least in the short term.

What this means for you:

Are you a shareholder? Even though growth is relatively muted, since SRE is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on SRE for a while, now might be the time to enter the stock. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy SRE. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.

With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Be aware that Sirius Real Estate is showing 5 warning signs in our investment analysis and 1 of those is concerning...

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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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