Advertisement
U.S. markets closed
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow 30

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Russell 2000

    2,124.55
    +10.20 (+0.48%)
     
  • Crude Oil

    83.11
    +1.76 (+2.16%)
     
  • Gold

    2,254.80
    +42.10 (+1.90%)
     
  • Silver

    25.10
    +0.35 (+1.41%)
     
  • EUR/USD

    1.0791
    -0.0039 (-0.36%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • GBP/USD

    1.2626
    -0.0012 (-0.10%)
     
  • USD/JPY

    151.3710
    +0.1250 (+0.08%)
     
  • Bitcoin USD

    70,838.12
    +1,761.30 (+2.55%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Future Outlook Of The Real Estate Industry And Government Properties Income Trust (GOV)

Government Properties Income Trust (NASDAQ:GOV) is a USD$1.85B real estate investment trust (REIT), which is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an optimistic near-term growth of 16.67% over the next couple of years. However, this rate came in below the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether GOV is lagging or leading in the industry. See our latest analysis for GOV

What’s the catalyst for GOV’s sector growth?

NasdaqGS:GOV Past Future Earnings Nov 29th 17
NasdaqGS:GOV Past Future Earnings Nov 29th 17

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. In the previous year, the industry saw growth of 0.39%, though still underperforming the wider US stock market. GOV lags the pack with its negative growth rate of -12.35% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 17.58% in the upcoming year.

Is GOV and the sector relatively cheap?

NasdaqGS:GOV PE PEG Gauge Nov 29th 17
NasdaqGS:GOV PE PEG Gauge Nov 29th 17

The REIT industry is trading at a PE ratio of 33x, higher than the rest of the US stock market PE of 22x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 7.62% compared to the market’s 10.06%, which may be indicative of past headwinds. On the stock-level, GOV is trading at a PE ratio of 34x, which is relatively in-line with the average REIT stock. In terms of returns, GOV generated 3.62% in the past year, which is 4% below the REIT sector.

What this means for you:

Are you a shareholder? GOV’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given GOV is trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto GOV as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value GOV based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If GOV has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company, given that it is trading relatively in-line with its peers. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time.

For a deeper dive into Government Properties Income Trust’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.

Advertisement