LTC Properties Inc (LTC) And The Real Estate Industry Prospect For 2017
LTC Properties Inc (NYSE:LTC) is a USD$1.87B 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, and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether LTC is a laggard or leader relative to its real estate sector peers. Check out our latest analysis for LTC Properties
What’s the catalyst for LTC'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. In the previous year, the industry saw growth of 0.58%, though still underperforming the wider US stock market. LTC leads the pack with its impressive earnings growth of 7.22% over the past year. However, analysts are expecting its future earnings growth to be more in-line with the industry average, hovering at -5.80% over the next couple of years.
Is LTC and the sector relatively cheap?
The REIT industry is trading at a PE ratio of 33x, higher than the rest of the US stock market PE of 22x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 8.31% on equities compared to the market’s 9.99%. On the stock-level, LTC is trading at a lower PE ratio of 21x, making it cheaper than the average REIT stock. In terms of returns, LTC generated 12.09% in the past year, which is 3.78% over the REIT sector.
What this means for you:
Are you a shareholder? LTC's future growth prospect aligns with that of the broader market and its PE is below its real estate peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of LTC, if you’re not already highly concentrated in the company.
Are you a potential investor? If LTC has been on your watchlist for a while, now may be the best time to enter into the stock. Its industry-aligned growth prospects may have not been fully priced into its shares given its lower PE ratio relative to its peers. Before you make the decision to buy, I recommend you look at other fundamentals factors and see whether there is a reason why the stock may be trading at a discount in the real estate sector.
For a deeper dive into LTC Properties'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.
