Reven Housing REIT Inc (NASDAQ:RVEN) is a USD$44.87M real estate investment trust (REIT), which is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an optimistic 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 RVEN is lagging or leading in the industry. See our latest analysis for RVEN
What’s the catalyst for RVEN’s sector growth?
Issues around rate hikes and yield changes have made investors sceptical of REITs. The capacity for these investment vehicles to absorb a rate hike should be considered, hence, factors such as lease durations and pricing power in the market would require a deeper dive. Over the past year, the industry saw growth of 0.39%, though still underperforming the wider US stock market. RVEN lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means RVEN may be trading cheaper than its peers.
Is RVEN and the sector relatively cheap?
REIT companies are typically trading at a PE 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 RVEN’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge RVEN’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? RVEN recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto RVEN as part of your portfolio. However, if you’re relatively concentrated in REIT, you may want to value RVEN based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If RVEN has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the REIT industry. Before you make a decision on the stock, take a look at RVEN’s cash flows and assess whether the stock is trading at a fair price.