Universal Health Realty Income Trust (NYSE:UHT) is a USD$1.03B real estate investment trust (REIT), which 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 . Today, I’ll take you through the real estate sector outlook, and also determine whether UHT is a laggard or leader relative to its real estate sector peers. View our latest analysis for Universal Health Realty Income Trust
What’s the catalyst for UHT’s sector growth?
Issues around rate hikes and yield changes have made investors sceptical of REITs. The capacity for these investment vehicles to absorb a rate hike should be considered, hence, factors such as lease durations and pricing power in the market would require a deeper dive. Over the past year, the industry saw growth of 0.14%, though still underperforming the wider US stock market. UHT leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make UHT a more expensive stock relative to its peers.
Is UHT and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 26x, higher than the rest of the US stock market PE of 19x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 7.49% compared to the market’s 10.43%, which may be indicative of past headwinds. On the stock-level, UHT is trading at a PE ratio of 23x, which is relatively in-line with the average REIT stock. In terms of returns, UHT generated 21.53% in the past year, which is 14.04% over the REIT sector.
What this means for you:
Are you a shareholder? UHT recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders, and the stock is currently trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto UHT as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value UHT based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If UHT has been on your watchlist for a while, now may be the time to enter into the stock. If you like its proven ability to generate growth, 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 Universal Health Realty 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.