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Why Automotive Properties Real Estate Investment Trust (TSE:APR.UN) Could Be Worth Watching

Simply Wall St

Automotive Properties Real Estate Investment Trust (TSE:APR.UN), which is in the reits business, and is based in Canada, saw a decent share price growth in the teens level on the TSX over the last few months. As a small cap stock, which tends to lack high analyst coverage, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s take a look at Automotive Properties Real Estate Investment Trust’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Automotive Properties Real Estate Investment Trust

What's the opportunity in Automotive Properties Real Estate Investment Trust?

Automotive Properties Real Estate Investment Trust is currently overpriced based on my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 68.09x is currently well-above the industry average of 10.76x, meaning that it is trading at a more expensive price relative to its peers. In addition to this, it seems like Automotive Properties Real Estate Investment Trust’s share price is quite stable, which could mean two things: firstly, it may take the share price a while to fall back down to an attractive buying range, and secondly, there may be less chances to buy low in the future once it reaches that value. This is because the stock is less volatile than the wider market given its low beta.

What does the future of Automotive Properties Real Estate Investment Trust look like?

TSX:APR.UN Past and Future Earnings, November 24th 2019

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. With revenues expected to grow by 36% over the next couple of years, the future seems bright for Automotive Properties Real Estate Investment Trust. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What this means for you:

Are you a shareholder? It seems like the market has well and truly priced in APR.UN’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe APR.UN should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on APR.UN for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for APR.UN, which means 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 Automotive Properties Real Estate Investment Trust. You can find everything you need to know about Automotive Properties Real Estate Investment Trust in the latest infographic research report. If you are no longer interested in Automotive Properties Real Estate Investment 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 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.

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. Thank you for reading.