Is First Capital Realty Inc (TSX:FCR) Still A Cheap Real Estate Stock?
First Capital Realty Inc (TSX:FCR), a CADCA$5.10B mid-cap, operates in the real estate industry which displays attractive investment characteristics relative to other sectors, especially over time. Real estate analysts are forecasting for the entire industry, an extremely elevated growth of 45.10% in the upcoming year , and a massive triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the Canadian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether FCR is a laggard or leader relative to its real estate sector peers. Check out our latest analysis for First Capital Realty
What’s the catalyst for FCR’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 of 0.42%, though still underperforming the wider Canadian stock market. FCR leads the pack with its impressive earnings growth of 60.03% over the past year. This proven growth may make FCR a more expensive stock relative to its peers.
Is FCR and the sector relatively cheap?
Real estate companies are typically trading at a PE of 13x, in-line with the Canadian stock market PE of 17x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11.17% on equities compared to the market’s 9.62%. On the stock-level, FCR is trading at a lower PE ratio of 8x, making it cheaper than the average real estate stock. In terms of returns, FCR generated 14.12% in the past year, which is 2.95% over the real estate sector.
What this means for you:
Are you a shareholder? FCR recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. In addition to this, its PE is below its real estate peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market isn’t as bullish of the growth going forward. If your investment thesis of the company hasn’t changed, now may be the right time to accumulate more of FCR, if you’re not already highly concentrated in the stock.
Are you a potential investor? If FCR has been on your watchlist for a while, now may be the best time to enter into the stock. Its industry-beating growth delivered have not been fully accounted for in its shares given its lower PE ratio relative to its peers. Before you make the decision to buy, I recommend you look at other fundamentals factors and see whether there is a reason why the stock may be trading at a discount in the real estate sector.
For a deeper dive into First Capital Realty’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.
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.
