The InterGroup Corporation (NASDAQ:INTG), a $56.08M small-cap, is a real estate company operating in an industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios as an asset class. Real estate investments typically display unique and attractive investment characteristics relative to other stocks and bonds, especially over a long time horizon. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. Is the real estate industry an attractive sector-play right now? In this article, I’ll take you through the real estate sector growth expectations, as well as evaluate whether InterGroup is lagging or leading its competitors in the industry. Check out our latest analysis for InterGroup
What’s the catalyst for InterGroup’s sector growth?
Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. In the past year, the industry delivered growth in the twenties, beating the US market growth of 10.41%. InterGroup 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 InterGroup may be trading cheaper than its peers.
Is InterGroup and the sector relatively cheap?
The real estate industry is trading at a PE ratio of 12.7x, lower than the rest of the US stock market PE of 19.9x. 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 9.15% on equities compared to the market’s 10.43%. Since InterGroup’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge InterGroup’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:InterGroup 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 real estate industry. However, before you make a decision on the stock, I suggest you look at InterGroup’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 INTG’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 InterGroup? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!