American Assets Trust, Inc. (NYSE:AAT), which is in the reits business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at American Assets Trust’s outlook and value based on the most recent financial data to see if the opportunity still exists.
Is American Assets Trust still cheap?
The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that American Assets Trust’s ratio of 27.98x is trading slightly above its industry peers’ ratio of 23.02x, which means if you buy American Assets Trust today, you’d be paying a relatively sensible price for it. And if you believe American Assets Trust should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. In addition to this, it seems like American Assets Trust’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s trading around the price multiples of other industry peers. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will American Assets Trust 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. American Assets Trust’s earnings over the next few years are expected to increase by 43%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? AAT’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. 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 AAT? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?
Are you a potential investor? If you’ve been keeping an eye on AAT, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for AAT, which means it’s worth further examining other factors such as the strength of its balance sheet, 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 American Assets Trust. You can find everything you need to know about American Assets Trust in the latest infographic research report. If you are no longer interested in American Assets Trust, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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