Does CareTrust REIT Inc’s (NASDAQ:CTRE) November Stock Price Reflect Its Future Growth?

Growth expectations for CareTrust REIT Inc (NASDAQ:CTRE) are high, but many investors are starting to ask whether its last close at $17.54 can still be rationalized by the future potential. Below I will be talking through a basic metric which will help answer this question.

View our latest analysis for CareTrust REIT

Has the CTRE train has slowed down?

If you are bullish about CareTrust REIT’s growth potential then you are certainly not alone. The consensus forecast from 7 analysts is extremely bullish with earnings forecasted to rise significantly from today’s level of $0.542 to $0.809 over the next three years. On average, this leads to a growth rate of 16% each year, which indicates an exceedlingly positive future in the near term.

Is CTRE available at a good price after accounting for its growth?

CareTrust REIT is trading at price-to-earnings (PE) ratio of 32.34x, this tells us the stock is overvalued compared to the US market average ratio of 18.43x , and overvalued based on current earnings compared to the reits industry average of 28.89x . This multiple is a median of profitable companies of 25 REITs companies in US including HMG/Courtland Properties, Pillarstone Capital REIT and Brookfield Property REIT.

NasdaqGS:CTRE PE PEG Gauge November 4th 18
NasdaqGS:CTRE PE PEG Gauge November 4th 18

We already know that CTRE appears to be overvalued when compared to its industry average. However, since CareTrust REIT is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 32.34x and expected year-on-year earnings growth of 16% give CareTrust REIT a higher PEG ratio of 1.99x. Based on this growth, CareTrust REIT’s stock can be considered a bit overvalued , based on fundamental analysis.

What this means for you:

CTRE’s current overvaluation could signal a potential selling opportunity to reduce your exposure to the stock, or it you’re a potential investor, now may not be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are CTRE’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has CTRE been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of CTRE’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.