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Should You Investigate Slate Office REIT (TSE:SOT.UN) At CA$5.92?

Simply Wall St

Slate Office REIT (TSE:SOT.UN), which is in the reits business, and is based in Canada, had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of CA$5.76 to CA$6.28. However, is this the true valuation level of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Slate Office REIT’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Slate Office REIT

What is Slate Office REIT worth?

Good news, investors! Slate Office REIT is still a bargain right now. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.79x is currently well-below the industry average of 11.52x, meaning that it is trading at a cheaper price relative to its peers. Slate Office REIT’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.

What kind of growth will Slate Office REIT generate?

TSX:SOT.UN Past and Future Earnings, January 23rd 2020

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Slate Office REIT, it is expected to deliver a negative revenue growth of -6.6% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What this means for you:

Are you a shareholder? Although SOT.UN is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to SOT.UN, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on SOT.UN for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Slate Office REIT. You can find everything you need to know about Slate Office REIT in the latest infographic research report. If you are no longer interested in Slate Office REIT, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.