Wharf (Holdings) Limited (SEHK:4), a HK$89.49B large-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 a low 3.93% growth over the next couple of years. This rate is below the growth rate of the Hong Kong stock market as a whole. Today, I’ll take you through the real estate sector outlook, and also determine whether Wharf (Holdings) is a laggard or leader relative to its real estate sector peers. View our latest analysis for Wharf (Holdings)

What’s the catalyst for Wharf (Holdings)’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. Over the past year, the industry saw growth in the thirties, beating the Hong Kong market growth of 11.35%. Wharf (Holdings) leads the pack with its impressive earnings growth of 46.59% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -66.67% compared to the wider real estate sector growth hovering next year.

Is Wharf (Holdings) and the sector relatively cheap?

The real estate sector’s PE is currently hovering around 8.32x, below the broader Hong Kong stock market PE of 13.93x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry returned a similar 8.37% on equities compared to the market’s 9.64%. On the stock-level, Wharf (Holdings) is trading at a PE ratio of 3.86x, which is relatively in-line with the average real estate stock. In terms of returns, Wharf (Holdings) generated 7.05% in the past year, which is 1.32% below the real estate sector.

Next Steps:

If Wharf (Holdings) has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a real estate industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the real estate sector. However, before you make a decision on the stock, I suggest you look at Wharf (Holdings)’s fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

2. Historical Track Record: What has 4’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Wharf (Holdings)? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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.