Is Cedar Woods Properties Limited (ASX:CWP) Still A Cheap Real Estate Stock?

Cedar Woods Properties Limited (ASX:CWP), a AUDA$482.82M small-cap, operates in the real estate industry which displays attractive investment characteristics relative to other sectors, especially over time. 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 Australian stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Cedar Woods Properties is a laggard or leader relative to its real estate sector peers. View our latest analysis for Cedar Woods Properties

What’s the catalyst for Cedar Woods Properties’s sector growth?

Not every category of real estate is likely to be impacted the same by macroeconomic factors such as interest rate hikes, and not all locations are primed to grow. So, investors must remain cautiously optimistic and analyse the fundamentals of the underlying industry. Over the past year, the industry saw negative growth of -6.03%, underperforming the Australian market growth of 6.89%. Cedar Woods Properties leads the pack with its impressive earnings growth of 4.23% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Cedar Woods Properties poised to deliver a 0.05% growth over the next couple of years compared to the industry’s -3.11%.

Is Cedar Woods Properties and the sector relatively cheap?

The real estate sector’s PE is currently hovering around 15x, relatively similar to the rest of the Australian stock market PE of 18x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 8.99% compared to the market’s 11.86%, potentially indicative of past headwinds. On the stock-level, Cedar Woods Properties is trading at a PE ratio of 11x, which is relatively in-line with the average real estate stock. In terms of returns, Cedar Woods Properties generated 14.26% in the past year, which is 5.27% over the real estate sector.

What this means for you:

Are you a shareholder? Cedar Woods Properties’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given Cedar Woods Properties is trading in-line with its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Cedar Woods Properties as part of your portfolio. However, if you’re relatively concentrated in real estate, you may want to value Cedar Woods Properties based on its cash flows to determine if it is overpriced based on its current growth outlook.

Are you a potential investor? If Cedar Woods Properties has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company, given that it is trading relatively in-line with its peers. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time.

For a deeper dive into Cedar Woods Properties’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.