Are Street Analysts Bullish on Cushman & Wakefield plc (CWK) Right Now?
We recently compiled a list of the 10 Best Undervalued UK Stocks To Buy Now. In this article, we are going to take a look at where Cushman & Wakefield plc (NYSE:CWK) stands against the other undervalued UK stocks.
The Economy of the United Kingdom
According to a report by KPMG, the economy of the UK is going through a combination of consumption tailwinds and falling inflation which is expected to support modest positive growth in the country for the remainder of 2024 and in 2025. The United Kingdom’s economy is projected to achieve GDP growth of 0.5% in 2024, and 0.9% in 2025, while inflation is expected to hold steady at 2.6% in both 2024 and 2025. Unemployment rates are also projected to be 4.5% in 2024 and 4.9% in 2025. The interest rates are anticipated to drop towards 3% by the end of 2025 and elections are likely to resolve political uncertainty, which would encourage business. However, geopolitical uncertainty, conflicts, and trade tensions could lead to inflation spikes and sharp shifts in monetary policies. Despite the uncertainty, KPMG's analysts remain optimistic about the future. Yael Selfin Vice Chair and Chief Economist at KPMG United Kingdom said:
“Global economic prospects are better for 2025, with inflation expected to return towards target and central banks more confident to cut policy rates from the current restrictive levels. The silver lining is a tailwind for big-ticket consumer purchases and business investment. Merger and acquisition activity could also continue to gather steam, as financial conditions ease and dry powder is deployed. However, the uncertainty remains around the political shifts, which could see more insular and protectionist economic policies.”
Investors view the UK market as particularly appealing due to its current valuations, which are similar to those of emerging markets when measured on a forward price-to-earnings basis. The UK equity index stands out for its substantial exposure to the energy sector, which could benefit significantly if the global economy outperforms expectations. Additionally, in times of escalating geopolitical tensions, the energy sector might also see gains, driven by rising prices. The composition of the UK equity market is well-structured, especially in terms of dividend yields and volatility. Compared to European equities, UK stocks are less volatile and offer higher dividend yields, making them an attractive option for investors at this time. Goldman Sachs is also anticipating modest growth in the United Kingdom’s 2025 and 2026 economic growth and forecasts the FTSE 100 Index to rise to 7,900 by the end of 2024. Goldman Sachs said:
“Low valuation, improving global demand and low supply aiding commodities stocks, and continued buybacks all support FTSE 100. We do not expect UKX to underperform as it did in 2023,”
According to Emma Wall, Head of Investment Analysis at Hargreaves Lansdown, the UK offers one of the best value opportunities among developed markets, particularly for those looking for undervalued investments. Despite its high performance in the FTSE 100, it is highlighted as being on a 45% discount compared to the U.S. market. Emma Wall sees the best value opportunity in the UK, citing the significant discount, international revenues, lack of leverage, and expectations of high dividend payouts as key reasons for this analysis.
The UK market presents a unique and compelling opportunity for investors, as the global economy shows signs of improvement and inflation stabilizes, the UK will benefit from economic growth despite some uncertainties, with that in context let’s take a look at the 10 best undervalued UK stocks to buy now.
Our Methodology
For this article, we used the Finviz screener to screen for UK-based companies that are trading at a forward P/E ratio of under 20 as of August 9. We listed the stocks according to their hedge fund sentiment, which was taken from our database of 920 elite hedge funds as of Q1 of 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An impressive commercial building showcasing the real estate services of the company.
Cushman & Wakefield plc (NYSE:CWK)
Number of Hedge Fund Investors: 22
Forward P/E ratio as of August 10: 14.19
Cushman & Wakefield plc (NYSE:CWK) is a global full-service commercial real estate company with over 100 years of experience, 52,000 employees, and 400 offices worldwide. The company is one of the largest commercial real estate services firms globally and is valued at $2.88 billion as of August 10. The company offers a wide range of services including leasing, capital markets sales, valuation, project management, and facilities management. In the year 2023, the company reported revenue of $9.5 billion across its core services of property, facilities project management, and other services. The company has also received numerous industry and business awards for its culture and commitment and is working with Microsoft to deploy an advanced suite of artificial intelligence solutions to improve its operational efficiency and increase competitive advantage.
On May 15, Cushman & Wakefield plc (NYSE:CWK) signed an exclusive affiliate agreement with CBS International to provide commercial property services in Austria. This agreement extends their successful partnership, as CBS International has been Cushman & Wakefield’s affiliate in Serbia and Montenegro since 2018 and in Croatia since 2019. CBS International, with around 400 employees, will now operate in Austria as Cushman & Wakefield CBS International. They have established an office in Vienna and are staffed with local market specialists and a team. The Austrian team includes specialists in Capital Markets, Agency, Valuation & Advisory, and Research & Insight, supported by CBS International’s broader business network to deliver comprehensive services.
Cushman & Wakefield plc’s (NYSE:CWK) new CEO is enhancing free cash flow, which gives the company greater flexibility to invest in growth opportunities, reduce debt, or return capital to shareholders. Additionally, Cushman & Wakefield plc (NYSE:CWK) is benefiting from long-term trends in the commercial real estate market, particularly the increasing outsourcing of property and facility management, which is expected to boost margins and further enhance free cash flow over time. The company’s asset-light and diversified business model also plays a significant role in its appeal, as it requires less capital investment, offers scalability, and reduces reliance on any single revenue stream, thereby providing greater stability. Furthermore, the market's anticipation of interest rate cuts in 2024, as indicated by the Federal Reserve is seen as a positive development that could lower borrowing costs and make commercial real estate investments more attractive. Vulcan Value Partners stated the following regarding Cushman & Wakefield plc’s (NYSE:CWK) in its Q4 2023 investor letter:
“Cushman & Wakefield plc (NYSE:CWK) provides commercial real estate services including property management, transaction management, leasing brokerage, and other services in the sale and servicing of commercial real estate. The company and new CEO made progress improving free cash flow during the quarter. However, the bigger factor in the quarter affecting the company and its peers, was the general market view on interest rates and the Fed’s December announcement that three rate cuts are likely expected in 2024. Cushman has a good business model that is asset light and diversified. The company is benefiting from secular trends such as the outsourcing of property and facility management which should help improve margins and free cash flow going forward.”
Cushman & Wakefield plc (NYSE:CWK) is trading 14.19 times its earnings, which is a 60% discount compared to the sector median of 36. The company’s earnings are expected to grow by 14% this year. The stock was held by 22 hedge funds at the end of the first quarter with stakes worth $161.27 million. As of March 31, Southpoint Capital Advisors is the largest shareholder in the company with a stake worth $57.53 million. Analysts hold a consensus Buy rating on the stock and the high price target of $14 implies an upside of 8.6%.
Overall CWK ranks 7th on our list of the best undervalued UK stocks to buy. You can visit 10 Best Undervalued UK Stocks To Buy Now to see the other undervalued UK stocks that are on hedge funds’ radar. While we acknowledge the potential of CWK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CWK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.