Real Estate Industry Trends And Its Impact On Columbia Property Trust Inc (CXP)
Columbia Property Trust Inc (NYSE:CXP) is a USD$2.54B real estate investment trust (REIT), which is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. 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. Today, I’ll take you through the real estate sector outlook, and also determine whether CXP is a laggard or leader relative to its real estate sector peers. See our latest analysis for CXP
What’s the catalyst for CXP’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 past year, the industry delivered growth of 0.58%, though still underperforming the wider US stock market. CXP leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make CXP a more expensive stock relative to its peers.
Is CXP and the sector relatively cheap?
REIT companies are typically trading at a PE of 33x, higher than the rest of the US stock market PE of 22x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 8.31% on equities compared to the market’s 9.99%. On the stock-level, CXP is trading at a lower PE ratio of 18x, making it cheaper than the average REIT stock. In terms of returns, CXP generated 5.57% in the past year, which is 3% below the REIT sector.
What this means for you:
Are you a shareholder? CXP recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. In addition to this, its PE is below its REIT peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market isn’t as bullish of the growth going forward. If your investment thesis of the company hasn’t changed, now may be the right time to accumulate more of CXP, if you’re not already highly concentrated in the stock.
Are you a potential investor? If CXP has been on your watchlist for a while, now may be the best time to enter into the stock. Its industry-beating growth delivered have not been fully accounted for in 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 REIT sector.
For a deeper dive into Columbia Property Trust’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.
