Nam Tai Property Inc (NYSE:NTP), a USD$440.09M small-cap, is a real estate company operating in an industry which is the most prevalent industry globally, and has continued to play a crucial role in the portfolios of investors. Real estate analysts are forecasting for the entire industry, a somewhat weaker growth of 0.59% in the upcoming year, and Below, I will examine the sector growth prospects, as well as evaluate whether NTP is lagging or leading in the industry. View our latest analysis for Nam Tai Property
What’s the catalyst for NTP’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 previous year, the industry endured negative growth of -6.86%, underperforming the US market growth of 4.49%. NTP leads the pack with its impressive earnings growth of 83.80% over the past year. This proven growth may make NTP a more expensive stock relative to its peers.
Is NTP and the sector relatively cheap?
Real estate companies are typically trading at a PE of 21x, relatively similar to the rest of the US stock market PE of 22x. 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 9.09% on equities compared to the market’s 9.99%. Since NTP’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge NTP’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? NTP recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto NTP as part of your portfolio. However, if you’re relatively concentrated in real estate, you may want to value NTP based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If NTP has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the real estate industry. Before you make a decision on the stock, take a look at NTP’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Nam Tai Property’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.