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Is Phileo Australia Limited (ASX:PHI) A Real Estate Industry Laggard Or Leader?

Phileo Australia Limited (ASX:PHI), a AUDA$354.36M small-cap, is a real estate company operating in an industry which displays attractive investment characteristics relative to other sectors, especially over time. 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 Australian stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Phileo Australia is lagging or leading in the industry. View our latest analysis for Phileo Australia

What’s the catalyst for Phileo Australia’s sector growth?

ASX:PHI Past Future Earnings Jan 1st 18
ASX:PHI Past Future Earnings Jan 1st 18

Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. Over the past year, the industry saw negative growth of -6.03%, underperforming the Australian market growth of 6.89%. Phileo Australia leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make Phileo Australia a more expensive stock relative to its peers.

Is Phileo Australia and the sector relatively cheap?

ASX:PHI PE PEG Gauge Jan 1st 18
ASX:PHI PE PEG Gauge Jan 1st 18

The real estate sector’s PE is currently hovering around 15x, in-line with the Australian stock market PE of 18x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 8.99% compared to the market’s 11.86%, potentially indicative of past headwinds. On the stock-level, Phileo Australia is trading at a PE ratio of 15x, which is relatively in-line with the average real estate stock. In terms of returns, Phileo Australia generated 20.74% in the past year, which is 11.76% over the real estate sector.

What this means for you:

Are you a shareholder? Phileo Australia 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 Phileo Australia as part of your portfolio. However, if you’re relatively concentrated in real estate, you may want to value Phileo Australia based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If Phileo Australia 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 Phileo Australia’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.

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