The real estate market is expected to see significant growth in the near term with advances in technology and organizations reorganizing their operations from offices. Given this scenario, we think battered real estate stocks Jones Lang LaSalle (JLL), Comstock Holding Companies (CHCI) and Forestar Group (FOR), which currently look cheap, could be ideal buys now. Read below to find out more.
The outbreak of the COVID-19 pandemic has acted as a massive constraint for the real estate market, as the need for the services offered by these establishments has diminished due to the restrictive measures imposed by the government and the complete closure of business activities.
However, analysts are optimistic about the industry’s long-term outlook. The global real estate market is expected to grow at a CAGR of 9.6% to reach $5.39 trillion in 2026.
With the arrival of digitization in the real estate sector, digital house hunting gained traction with consumers buying or mortgaging homes through virtual features such as 3D tours and drone videos.
Additionally, the growing demand for single-family homes and organizations resuming operations with work from the office are expected to support the growth of this industry.
Given the backdrop, battered real estate stocks Jones Lang LaSalle Incorporated (JLL), Comstock Holding Companies, Inc. (CHIC) and Forestar Group Inc. (FOR) that currently appear to be trading at a discount, might be ideal buys now.
Jones Lang LaSalle Incorporated (JLL)
JLL, a professional services firm, provides real estate and investment management services in the Americas, Europe, the Middle East, Africa and Asia-Pacific.
JLL’s revenue increased 18.9% from the prior year quarter to $4.80 billion in the fiscal quarter ended March 31, 2022.
Net profit for the quarter was $145.60 million, reflecting a 41.4% year-over-year increase, while its adjusted EBITDA was $273.60 million, up 43.9% from the prior year quarter.
The company’s adjusted EPS was $3.47, up 65.2% from the prior year quarter.
Analysts expect JLL’s EPS for the fiscal quarter ending June 2022 to be $4.44, indicating a 5.7% year-over-year increase. Additionally, the company’s EPS is expected to increase 3.1% year-over-year to $20.08 in the current fiscal year.
It has an impressive history of earnings surprises, as it has exceeded Street EPS estimates in each of the past four quarters.
In non-GAAP forward P/E terms, JLL is currently trading at 7.76x, 74.1% below the industry average of 29.92x. Its 12-month price-to-sales multiple of 0.67 is 87.5% below the industry average of 5.35.
JLL’s stock has fallen 42.2% year-to-date to close last trading session at $155.76.
JLL’s strong fundamentals are reflected in its POWR Rankings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
JLL also has a B rating in growth and value. It is ranked #1 out of 44 stocks in the Real estate services industry.
Beyond what is stated above, we also rated JLL for Momentum, Stability, Sentiment, and Quality. Get all JLL ratings here.
Comstock Holding Companies, Inc. (CHIC)
CHCI develops, operates and manages mixed-use and transit-oriented properties primarily in the Washington, DC metropolitan area. The company also offers property development and management services.
On June 13, CHCI announced the completion of two significant transactions with CP Real Estate Services, LC; an entity owned by Christopher Clemente, CEO of Comstock, which should strengthen its balance sheet and position the company for future growth.
The first transaction involves the repurchase of outstanding shares at a discount, while the second transaction represents the replacement and modification of the company’s asset management agreement.
CHCI’s revenue increased 27.6% year-over-year to $8.73 million in the first quarter of Fiscal 2022. Its operating income increased 208.1% from year-on-year value to $1.37 million, while its net profit improved 416.4% year-on-year. at $2.01 million.
The company’s net earnings per share are up 340% from their value a year ago at $0.22.
In terms of last 12 months price/sales, CHCI is currently trading at 1.15x, 78.5% below the industry average of 5.35x. Its 12-month EV/EBIT multiple of 8.13 is 80.8% below the industry average of 42.28.
The stock has fallen 5.2% year-to-date to close the last trading session at $4.60. However, it has gained 12.3% over the past month.
CHCI’s strong fundamentals are reflected in its POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our POWR rating system.
The company also has a B rating in Value, Momentum, Sentiment and Quality. The stock is ranked #5 in the real estate services sector. To obtain CHCI’s ratings for stability and growth, Click here.
Forestar Group Inc. (FOR)
FOR operates as a residential lot development company in the United States. It acquires land, develops infrastructure for single-family residential communities and sells its finished single-family residential lots to homebuilders.
For the fiscal quarter ended March 31, 2022, FOR’s revenue increased 46.8% year over year to $421.60 million. Net profit attributable to FOR increased by 68.3% over the previous year’s value to $47.80 million.
Additionally, its net earnings per share were $0.96, up 62.7% from the prior year quarter.
Street expects FOR’s revenue for the fiscal quarter ending June 2022 to improve 31.3% year-over-year to $410.93 million.
The consensus EPS estimate of $0.88 for the same quarter represents a 48% increase over the same period last year. FOR has also beaten consensus EPS estimates over the past four quarters.
In non-GAAP forward PER terms, FOR is currently trading at 3.63x, 87.9% below the industry average of 29.92x. Its 12-month EV/EBIT multiple of 5.62 is 86.7% below the industry average of 42.28.
The stock has fallen 38.1% year-to-date to close the last trading session at $13.46.
FOR has an overall rating of B, translating to Buy in our proprietary rating system. The stock is rated A in Growth and Sentiment and B in Value. In the same sector, it is ranked No. 4. Click here to see additional POWR ratings for quality, momentum, and stability for FOR.
JLL shares closed at $167.02 on Friday, up $11.26 (+7.23%). Year-to-date, JLL is down -37.99%, compared to a -22.73% rise in the benchmark S&P 500 over the same period.
About the Author: Komal Bhattar
Komal’s passion for the stock market and financial analysis led her to pursue her career in investment research. Its fundamental approach to stock analysis helps investors identify the best investment opportunities.