First Capital Realty Inc (TSX:FCR), a real estate company based in Canada, received a lot of attention from a substantial price movement on the TSX in the over the last few months, increasing to CA$21.18 at one point, and dropping to the lows of CA$19.1. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether First Capital Realty’s current trading price of CA$20.19 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at First Capital Realty’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View our latest analysis for First Capital Realty
What’s the opportunity in First Capital Realty?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.81x is currently trading slightly below its industry peers’ ratio of 12.09x, which means if you buy First Capital Realty today, you’d be paying a reasonable price for it. And if you believe that First Capital Realty should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Furthermore, First Capital Realty’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. This may mean it is less likely for the stock to fall lower from natural market volatility, which suggests less opportunities to buy moving forward.
What kind of growth will First Capital Realty generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted revenue growth of 2.92% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for First Capital Realty, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in FCR’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at FCR? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on FCR, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on First Capital Realty. You can find everything you need to know about First Capital Realty in the latest infographic research report. If you are no longer interested in First Capital Realty, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.