Parkway Life Real Estate Investment Trust (SGX:C2PU): How Much Money Comes Back To Investors?
Two important questions to ask before you buy Parkway Life Real Estate Investment Trust (SGX:C2PU) is, how it makes money and how it spends its cash. After investment, what’s left over is what belongs to you, the investor. This also determines how much the stock is worth. I’ve analysed below, the health and outlook of C2PU’s cash flow, which will help you understand the stock from a cash standpoint. Cash is an important concept to grasp as an investor, as it directly impacts the value of your shares and the future growth potential of your portfolio.
Check out our latest analysis for Parkway Life Real Estate Investment Trust
Is Parkway Life Real Estate Investment Trust generating enough cash?
Parkway Life Real Estate Investment Trust generates cash through its day-to-day business, which needs to be reinvested into the company in order for it to continue operating. What remains after this expenditure, is known as its free cash flow, or FCF, for short.
I will be analysing Parkway Life Real Estate Investment Trust’s FCF by looking at its FCF yield and its operating cash flow growth. The yield will tell us whether the stock is generating enough cash to compensate for the risk investors take on by holding a single stock, which I will compare to the market index. The growth will proxy for sustainability levels of this cash generation.
Free Cash Flow = Operating Cash Flows – Net Capital Expenditure
Free Cash Flow Yield = Free Cash Flow / Enterprise Value
where Enterprise Value = Market Capitalisation + Net Debt
Along with a positive operating cash flow, Parkway Life Real Estate Investment Trust also generates a positive free cash flow. However, the yield of 3.67% is not sufficient to compensate for the level of risk investors are taking on. This is because Parkway Life Real Estate Investment Trust’s yield is well-below the market yield, in addition to serving higher risk compared to the well-diversified market index.
Does Parkway Life Real Estate Investment Trust have a favourable cash flow trend?
Can C2PU improve its operating cash production in the future? Let’s take a quick look at the cash flow trend the company is expected to deliver over time. In the next few years, the company is expected to grow its cash from operations at a double-digit rate of 11%, ramping up from its current levels of S$88m to S$98m in three years’ time. Furthermore, breaking down growth into a year on year basis, C2PU is able to increase its growth rate each year, from 5.3% in the upcoming year, to 7.6% by the end of the third year. The overall picture seems encouraging, should capital expenditure levels maintain at an appropriate level.
Next Steps:
Parkway Life Real Estate Investment Trust’s low free cash flow yield is deterring, in addition to its low growth prospects. This means that, as an investor, you would be rewarded less than just holding a portfolio made up of all the stocks in the market, as well as taking on higher risk! Keep in mind that cash is only one aspect of investment analysis and there are other important fundamentals to assess. You should continue to research Parkway Life Real Estate Investment Trust to get a better picture of the company by looking at:
Valuation: What is C2PU worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether C2PU is currently mispriced by the market.
Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Parkway Life Real Estate Investment Trust’s board and the CEO’s back ground.
Other High-Performing Stocks: If you believe you should cushion your portfolio with something less risky, scroll through our free list of these great stocks here.
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.
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. Thank you for reading.
