Is Now The Right Time To Invest In Real Estate And Bluerock Residential Growth REIT Inc (BRG)?
Bluerock Residential Growth REIT Inc (AMEX:BRG) is a USD$279.82M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and a strong near-term growth of 16.67% over the next couple of years. However, this rate came in below the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether BRG is lagging or leading in the industry. Check out our latest analysis for Bluerock Residential Growth REIT
What’s the catalyst for BRG’s sector growth?
Concerns surrounding rate increases and treasury yield movements have made investors dubious around investing in REIT stocks. This is because REITs tend to be dependent on debt funding. They are also considered as bond investment alternatives due to their high and stable dividend payments. Over the past year, the industry saw growth of 0.39%, though still underperforming the wider US stock market. BRG lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook doesn’t seem to be much better given that analysts are forecasting continued unprofitability going forward.
Is BRG and the sector relatively cheap?
The REIT industry is trading at a PE ratio of 33x, above the broader US stock market PE of 22x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 7.62% compared to the market’s 10.06%, which may be indicative of past headwinds. Since BRG’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge BRG’s value is to assume the stock should be relatively in-line with its industry. In terms of returns, BRG generated 7.56% in the past year, in-line with its industry average.
What this means for you:
Are you a shareholder? BRG’s uncertain outlook is a negative for shareholders, with the prospect of negative earnings persisting into the future. If your view of the industry outlook has changed since you bought, now may be a good time to revisit your initial investment thesis. Also, if you’re relatively concentrated in real estate, you may want to value BRG based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If BRG has been on your watchlist for a while, now may not be the time to enter into the stock given its negative future prospect. However, before you make a decision on the stock, I suggest you look at BRG’s future cash flows in order to assess whether the stock is trading at a reasonable price, as well as other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Bluerock Residential Growth REIT’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.
