Performance in the real estate sector generally tracks the economic cycle. During periods of high growth and inflation, real estate investments usually post strong returns. However, during an economic bust, these investments tend to underperform. Genesis Land Development and True North Commercial Real Estate Investment Trust are real estate companies that are currently trading below what they’re actually worth. There’s a few ways you can measure the value of a cyclical company – you can forecast how much money it will make in the future and base your valuation off of this, or you can look around at its peers of similar size and industry to roughly estimate what it should be worth. Below, I’ve created a list of companies that compare favourably in all criteria based on their most recent financial data, making them potentially good investments.
Genesis Land Development Corp. engages in the acquisition, development, and sale of land, residential lots, and homes primarily in the greater Calgary area, Canada. Established in 1991, and headed by CEO Stephen Griggs, the company employs 55 people and with the stock’s market cap sitting at CAD CA$152.68M, it comes under the small-cap group.
GDC’s stock is now floating at around -85% under its intrinsic level of $23.55, at a price tag of CA$3.53, according to my discounted cash flow model. This difference in price and value gives us a chance to buy low. What’s even more appeal is that GDC’s PE ratio is currently around 9.05x against its its Real Estate peer level of, 10.84x indicating that relative to its peers, we can invest in GDC at a lower price. GDC is also strong in terms of its financial health, with current assets covering liabilities in the near term and over the long run. The stock’s debt-to-equity ratio of 13.73% has been reducing over the past couple of years signifying GDC’s ability to pay down its debt. More detail on Genesis Land Development here.
The REIT is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario. True North Commercial Real Estate Investment Trust was founded in 2012 and with the stock’s market cap sitting at CAD CA$318.13M, it comes under the small-cap stocks category.
TNT.UN’s shares are now trading at -56% beneath its true level of $15.16, at the market price of CA$6.67, based on my discounted cash flow model. The divergence signals an opportunity to buy TNT.UN shares at a low price. In addition to this, TNT.UN’s PE ratio stands at 9.58x while its REITs peer level trades at, 9.88x suggesting that relative to its comparable company group, TNT.UN can be bought at a cheaper price right now. TNT.UN is also strong financially, as current assets can cover liabilities in the near term and over the long run. More detail on True North Commercial Real Estate Investment Trust here.
Agellan Commercial Real Estate Investment Trust is an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario. Agellan Commercial Real Estate Investment Trust is headed by CEO Frank Camenzuli. With the company’s market capitalisation at CAD CA$374.67M, we can put it in the small-cap group
ACR.UN’s shares are now floating at around -60% beneath its true level of $28.41, at the market price of CA$11.39, according to my discounted cash flow model. This discrepancy signals a potential opportunity to buy ACR.UN shares at a low price. What’s even more appeal is that ACR.UN’s PE ratio is trading at 6.97x relative to its REITs peer level of, 9.88x meaning that relative to its competitors, ACR.UN’s stock can be bought at a cheaper price. ACR.UN also has a healthy balance sheet, with near-term assets able to cover upcoming and long-term liabilities. More detail on Agellan Commercial Real Estate Investment Trust here.