The real estate sector performs relatively in-line with the wider economy. Prosperous periods bring about high growth and inflation, leading to strong returns in real estate investments. Currently, One Liberty Properties and Xenia Hotels & Resorts are real estate companies I’ve identified as potentially undervalued, meaning their share price is below what these companies are actually worth. There’s a few ways you can measure the value of a cyclical company – you can forecast how much money it will make in the future and base your valuation off of this, or you can look around at its peers of similar size and industry to roughly estimate what it should be worth. Below, I’ve created a list of companies that compare favourably in all criteria based on their most recent financial data, making them potentially good investments.
One Liberty Properties, Inc. (NYSE:OLP)
One Liberty is a self-administered and self-managed real estate investment trust incorporated in Maryland in 1982. The company was established in 1982 and with the market cap of USD $491.91M, it falls under the small-cap group.
OLP’s stock is now hovering at around -44% under its actual level of $46.21, at the market price of US$25.71, according to my discounted cash flow model. This mismatch indicates a potential opportunity to buy low. Additionally, OLP’s PE ratio stands at 17.88x compared to its REITs peer level of, 20.52x suggesting that relative to other stocks in the industry, OLP’s stock can be bought at a cheaper price. OLP is also in good financial health, as current assets can cover liabilities in the near term and over the long run.
Continue research on One Liberty Properties here.
Xenia Hotels & Resorts, Inc. (NYSE:XHR)
Xenia Hotels & Resorts, Inc. is a self-advised and self-administered REIT that invests primarily in premium full service and lifestyle hotels, with a focus on the top 25 U.S. The company size now stands at 51 people and with the company’s market cap sitting at USD $2.69B, it falls under the mid-cap category.
XHR’s shares are now hovering at around -40% beneath its intrinsic value of $42.18, at the market price of US$25.15, based on my discounted cash flow model. This mismatch indicates a chance to invest in XHR at a discounted price. In addition to this, XHR’s PE ratio stands at around 18.42x while its REITs peer level trades at, 20.52x indicating that relative to its competitors, you can buy XHR for a cheaper price. XHR is also a financially robust company, with near-term assets able to cover upcoming and long-term liabilities.
Continue research on Xenia Hotels & Resorts here.
Sabra Health Care REIT, Inc. (NASDAQ:SBRA)
As of March 31, 2018, Sabra’s investment portfolio included 515 real estate properties held for investment (consisting of (i) 380 Skilled Nursing/Transitional Care facilities, (ii) 89 Senior Housing communities (“Senior Housing – Leased”), (iii) 24 Senior Housing communities operated by third-party property managers pursuant to property management agreements (“Senior Housing – Managed”) and (iv) 22 Specialty Hospitals and Other facilities), five assets held for sale, one investment in a direct financing lease, 21 investments in loans receivable (consisting of (i) two mortgage loans, (ii) two construction loans, (iii) one mezzanine loan, (iv) one pre-development loan and (v) 15 other loans), 13 preferred equity investments and one investment in an unconsolidated joint venture that owns 172 Senior Housing – Managed communities. Founded in 2010, and currently run by Richard Matros, the company now has 61 employees and has a market cap of USD $3.74B, putting it in the mid-cap group.
SBRA’s shares are currently floating at around -56% less than its actual worth of $47.72, at a price of US$20.98, based on my discounted cash flow model. This price and value mismatch indicates a potential opportunity to buy the stock at a low price. What’s even more appeal is that SBRA’s PE ratio is trading at 14.64x against its its REITs peer level of, 20.52x implying that relative to its peers, SBRA can be bought at a cheaper price right now. SBRA is also robust in terms of financial health, with near-term assets able to cover upcoming and long-term liabilities. It’s debt-to-equity ratio of 98.09% has been dropping over time, showing SBRA’s ability to reduce its debt obligations year on year. More on Sabra Health Care REIT here.
For more financially sound, undervalued companies to add to your portfolio, explore this interactive list of undervalued stocks.
To help readers see pass 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.