Plaza Centers NV (LSE:PLAZ), a GBP£6.00M small-cap, is a real estate company operating in an industry which is the most prevalent industry globally, and has continued to play a crucial role in the portfolios of investors. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year . Today, I’ll take you through the real estate sector outlook, and also determine whether PLAZ is a laggard or leader relative to its real estate sector peers. Check out our latest analysis for Plaza Centers N.V
What’s the catalyst for PLAZ’s sector growth?
Over the past couple of years, as yields for high quality real estate investments have become under pressure, investors have swung towards more niche and diversified buildings such as medical offices, student housing and data storage facilities. Over the past year, the industry saw negative growth of -6.42%, underperforming the UK market growth of 1.54%. PLAZ lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its real estate peers. As the company trails the rest of the industry in terms of growth, PLAZ may also be a cheaper stock relative to its peers.
Is PLAZ and the sector relatively cheap?
The real estate industry is trading at a PE ratio of 12x, lower than the rest of the UK stock market PE of 18x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 12.08% on equities compared to the market’s 12.78%. Since PLAZ’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PLAZ’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? PLAZ has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of PLAZ, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how PLAZ fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If PLAZ has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its real estate peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at PLAZ’s future cash flows in order to assess whether the stock is trading at a reasonable price.