A Look At Panther Securities PLC (AIM:PNS) And The Real Estate Sector
Panther Securities PLC (AIM:PNS), a GBP£58.80M small-cap, operates in the real estate industry which is the most prevalent industry in the global economy, and as an asset class, it has continued to play a crucial role in the portfolios of various investors. Real estate assets usually exhibit distinct and desirable investment features compared to other types of securities, in particular, over a long period of time. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year, and a low 7 percent growth over the next couple of years. This rate is below the growth rate of the Australian stock market as a whole. Is the real estate industry an attractive sector-play right now? Below, I will examine the sector growth prospects, and also determine whether PNS is a laggard or leader relative to its real estate sector peers. See our latest analysis for PNS
What’s the catalyst for PNS's sector growth?
Not every category of real estate is likely to be impacted the same by macroeconomic factors such as interest rate hikes, and not all locations are primed to grow. So, investors must remain cautiously optimistic and analyse the fundamentals of the underlying industry. In the past year, the industry delivered growth in the teens, beating the Australian market growth of 6 percent. PNS lags the pack with its negative growth rate of -114 percent over the past year, which indicates the company has been growing at a slower pace than its real estate peers. As the company trails the rest of the industry in terms of growth, PNS may also be a cheaper stock relative to its peers.
Is PNS and the sector relatively cheap?
The real estate industry is trading at a PE ratio of 12 times, below the broader Australian stock market PE of 22 times. This means the industry, on average, is relatively undervalued compared to the wider market - a potential mispricing opportunity here! Though, the industry did returned a lower 13 percent compared to the market’s 16 percent, which may explain the lower relative valuation. Since PNS’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PNS’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? PNS has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of PNS, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how PNS fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If PNS has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its real estate peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at PNS’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Panther Securities'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.
