Comstock Holding Companies Inc (NASDAQ:CHCI), a US$5.75M small-cap, operates in the retail industry impacted by the digital transformation for all retail channels, and the challenging economic environment. In particular, physical store retailers faced the inevitable challenge of building up an online presence in order to enhance their omnichannel capabilities. Most of the growth have been a result of the investment in streamlining distribution infrastructure and improving website platforms to accommodate the shift in spending. Retail analysts are forecasting for the entire industry, a strong double-digit growth of 16.76% in the upcoming year , and a robust short-term growth of 29.03% over the next couple of years. This rate is more than double the growth rate of the US stock market as a whole. Should your portfolio be overweight in the retail sector at the moment? Today, I will analyse the industry outlook, and also determine whether Comstock Holding Companies is a laggard or leader relative to its retail sector peers. See our latest analysis for Comstock Holding Companies
What’s the catalyst for Comstock Holding Companies’s sector growth?
E-retailing is expected to remain the fastest growing sales channel, shifting the retail landscape. Significant number of retail store closures and bankruptcies were an indication of both changing consumer preferences and rising online competition. In the past year, the industry delivered growth in the teens, beating the US market growth of 9.87%. Comstock Holding Companies lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Comstock Holding Companies may be trading cheaper than its peers.
Is Comstock Holding Companies and the sector relatively cheap?
The retail sector’s PE is currently hovering around 16.84x, relatively similar to the rest of the US stock market PE of 18.97x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 10.92% on equities compared to the market’s 10.33%. Since Comstock Holding Companies’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Comstock Holding Companies’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Comstock Holding Companies recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If the stock has been on your watchlist for a while, now may be the time to buy, if you like its ability to deliver growth and are not highly concentrated in the retail industry. However, before you make a decision on the stock, I suggest you look at Comstock Holding Companies’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has CHCI’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Comstock Holding Companies? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!