Nam Tai Property Inc (NYSE:NTP), a $484.74M 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 assets usually exhibit distinct and desirable investment features compared to other types of securities, in particular, over a long period of time. 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. An interesting question to explore is whether we can we benefit from entering into the real estate sector right now. Below, I will examine the sector growth prospects, as well as evaluate whether Nam Tai Property is lagging or leading its competitors in the industry. See our latest analysis for Nam Tai Property
What’s the catalyst for Nam Tai Property’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 10.46%. Given the lack of analyst consensus in Nam Tai Property’s outlook, we could potentially assume the stock’s growth rate broadly follows its real estate industry peers. This means it is an attractive growth stock relative to the wider US stock market.
Is Nam Tai Property and the sector relatively cheap?
The real estate industry is trading at a PE ratio of 12.9x, lower than the rest of the US stock market PE of 20.1x. 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 9.16% on equities compared to the market’s 10.42%. On the stock-level, Nam Tai Property is trading at a higher PE ratio of 410x, making it more expensive than the average real estate stock. In terms of returns, Nam Tai Property generated 0.0047% in the past year, which is 9% below the real estate sector.
Next Steps:If you’ve been keeping an eye on the real estate sector, now may be the right time to dive deeper into the stock-level. Although it is expected to deliver lower growth on an industry level relative to the rest of the market, it is also trading at a PE below the average stock. In the case that the market is overly pessimistic on the real estate sector, there could be a mispricing opportunity to take advantage of. However, before you make a decision on the stock, I suggest you look at Nam Tai Property’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 NTP’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 Nam Tai Property? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!