Propertylink Group (ASX:PLG), a A$587.71M 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. 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, 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 Australian stock market as a whole. Is now the right time to pick up some shares in real estate companies? Today, I will analyse the industry outlook, as well as evaluate whether Propertylink Group is lagging or leading its competitors in the industry. Check out our latest analysis for Propertylink Group
What’s the catalyst for Propertylink Group’s sector growth?
ASX:PLG Past Future Earnings Jan 26th 18 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. Over the past year, the industry saw growth in the teens, beating the Australian market growth of 6.98%. Propertylink Group lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its REIT peers. As the company trails the rest of the industry in terms of growth, Propertylink Group may also be a cheaper stock relative to its peers.
Is Propertylink Group and the sector relatively cheap?
ASX:PLG PE PEG Gauge Jan 26th 18 REIT companies are typically trading at a PE of 7.3x, below the broader Australian stock market PE of 18.1x. This illustrates a somewhat under-priced sector compared to the rest of the market. Furthermore, the industry returned a higher 15.74% compared to the market’s 11.86%, making it a potentially attractive sector. Since Propertylink Group’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Propertylink Group’s value is to assume the stock should be relatively in-line with its industry. In terms of returns, Propertylink Group generated 27.70% in the past year, which is 11.95% over the REIT sector.
Propertylink Group has been a REIT industry laggard in the past year. If Propertylink Group has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its real estate peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Propertylink Group’s fundamentals in order to build a holistic investment thesis.
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