New York Mortgage Trust Inc (NYMT): Is Real Estate An Attractive Sector Play?

New York Mortgage Trust Inc (NASDAQ:NYMT), a USD$715.87M small-cap, is a real estate company operating in an industry which is the most prevalent industry in the global economy, and as an asset class, it has continued to play a crucial role in the portfolios of various investors. A real estate investment trust (REIT) is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, a fairly unexciting growth rate of 1.98% in the upcoming year . Is now the right time to pick up some shares in real estate companies? In this article, I’ll take you through the real estate sector growth expectations, as well as evaluate whether NYMT is lagging or leading its competitors in the industry. View our latest analysis for New York Mortgage Trust

What’s the catalyst for NYMT's sector growth?

Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. In the past year, the industry delivered growth in the twenties, beating the US market growth of 11.05%. NYMT leads the pack with its impressive earnings growth of 31.25% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with NYMT poised to deliver a 11.28% growth over the next couple of years. This growth may make NYMT a more expensive stock relative to its peers.

Is NYMT and the sector relatively cheap?

The REIT sector's PE is currently hovering around 11x, lower than the rest of the US stock market PE of 19x. This means the industry, on average, is relatively undervalued compared to the wider market - a potential mispricing opportunity here! Though, the industry returned a similar 8.92% on equities compared to the market’s 10.46%. On the stock-level, NYMT is trading at a PE ratio of 12x, which is relatively in-line with the average REIT stock. In terms of returns, NYMT generated 8.27% in the past year, in-line with its industry average.

What this means for you:

Are you a shareholder? NYMT’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given NYMT is trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto NYMT as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value NYMT based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If NYMT has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company, given that it is trading relatively in-line with its peers. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. Before you make a decision on the stock, I suggest you take a look at other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.

For a deeper dive into New York Mortgage Trust's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.