The Conygar Investment Company PLC (AIM:CIC), a GBP£110.71M 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, and Today, I will analyse the industry outlook, as well as evaluate whether CIC is lagging or leading in the industry. Check out our latest analysis for Conygar Investment Company
What’s the catalyst for CIC’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. In the previous year, the industry endured negative growth of -6.42%, underperforming the UK market growth of 1.54%. CIC 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, CIC may also be a cheaper stock relative to its peers.
Is CIC 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 means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry returned a similar 12.08% on equities compared to the market’s 12.78%. Since CIC’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CIC’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? CIC has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of CIC, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how CIC fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If CIC 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 CIC’s future cash flows in order to assess whether the stock is trading at a reasonable price.