What are the excellent stocks in the real estate services sector of the US stocks?

逍遥投资派 wrote a column · Apr 24, 2022 15:54

The 83rd original article by the Happy Investment Group.

What are the excellent stocks in the real estate services sector of the US stocks?

US Daily Research 29: Taking stock of real estate services stocks.

【Analysis results at the end 👇 】

Today is April 23, 2022, Saturday. Let's take stock of the real estate services sector, a total of 41 stocks, with market caps ranging from 11.36 million to 28 billion. There are 27 stocks with a market cap of over 0.3 billion, and we will focus our research on these 27 stocks.

From the perspective of PE ratio, there are 10 stocks with PE ratios less than 0, 4 stocks with PE ratios less than 8.5, 7 stocks with PE ratios between 8.5 and 25, and 6 stocks with PE ratios above 25. Poor profitability, with neutral valuation.

First, look at 4 stocks with a pe ratio lower than 8.5.

$Newmark Group (NMRK.US)$In the past 5 years, revenue has grown every year except for 2020, while operating profit has decreased for 3 years. Especially in 2021, operating profit dropped by 87%, while net income has basically been shrinking, surging dramatically in 2021 to 0.98 billion, which is very dramatic.

Operating profit is relatively easy to understand. In recent years, operating expenses have increased more than revenue growth, continuously squeezing operating profit, leaving only 2.2 million in 2021.

Net income, on the other hand, saw a sudden appearance of 1.23 billion in 'other non-operating income' in 2021, far exceeding the usual tens of millions to one hundred million levels in previous years, likely a one-time income.

Based on the 2020 net income of 0.109 billion, the current pe ratio is 23. Considering the continuously shrinking operating profit and uncertain one-time income, the attractiveness is not significant.

$Realogy Holdings (RLGY.US)$Revenue remained relatively stable until 2021, suddenly increasing by 28% in 2021. Operating profit decreased for 3 years and then increased for two years, which aligns quite well. However, net income continued to drop for 2 years, entering a deficit space for 2 years, turning around in 2021. The income statement shows a capital asset impairment of 0.25 billion in 2019, offset by 0.68 billion in 2020. The company's asset quality is concerning. In 2021, special expenses reached 42 million, indicating that this issue has not been fully resolved.

With an asset-liability ratio of 70%, including goodwill at 4.8 billion, and net assets of only 2.2 billion, the 0.7 times pb ratio discount is meaningless.

Currently, with a pe ratio of 4.65, the attractiveness is limited.

$Douglas Elliman (DOUG.US)$The company was newly listed in December 2021, with a slight profit in 2020. In 2021, revenue increased by 75%, and operating profit increased to 0.1 billion. The net income curve is somewhat inconsistent, with a loss of 46.4 million in 2020 and a profit of nearly 0.1 billion in 2021.

The income statement shows that the "impairment of capital assets" in 2020 was 58.25 million, which was the main reason for the losses in 2020.

Currently, the P/E ratio is 5.3. It might be better to wait for a few more quarterly reports before making a decision, after all, maintaining a 75% revenue growth rate is a very big challenge.

$Tricon Residential (TCN.US)$It is a Canadian company newly listed in October 2021. From 2020 to 2021, revenue shrank by 3.9%, operating profit decreased by 34.5%, but net income nearly tripled. The income statement shows a "securities sales gain" of 0.623 billion, which should be from the IPO. A P/E ratio of 7.7 is not attractive.

Let's take a look at the 7 stocks with P/E ratios ranging from 8.5 to 25.

$Kennedy-Wilson (KW.US)$The 5-year net income growth trajectory was only interrupted in 2020, with an average growth rate of 34% over 5 years and 16.6% over the past 3 years. The EPS change curve over the last three years roughly aligns, but operating profit has significantly declined for 4 consecutive years, and losses have been widening over the past 3 years.

The income statement shows that "securities sales gain" and "equity gain" amounted to 0.75 billion, and this income can be traced back a long way. It should be consolidated into the company's core revenue. This company should not be classified under the real estate services sector, but rather under the real estate investment sector, which is more appropriate.

Operating income has been declining for nearly 4 years, but the return on net assets is clearly increasing, which actually confirms that the company, disguised as a service provider, is actually engaging in investment activities. Therefore, revenue does not play a decisive role in the final income, while operating profit is lagging behind. It is difficult to determine whether future operating profit losses will continue to expand, so it is currently impossible to evaluate the value of this stock.

$Jones Lang LaSalle (JLL.US)$Except for 2020, there has been good growth over the past 5 years. Operating profit only declined once in 2020, while net income saw a 20% decline in 2017 and 2020. The income statement shows that in 2017, the income tax increased by 0.16 billion compared to the previous year, a 160% increase.

5-year average net profit growth rate23.5, and EPS growth is also quite similar.

In 2021, revenue increased by 16.7%, net income increased by 127%, mainly due to the significant decrease in main business costs, resulting in a 3.38% increase in gross margin and a 2.15 billion increase in gross profit. Generally, maintaining lower operating costs is relatively easier than maintaining higher revenue growth.

Operating income grew for 4 out of 5 years, operating cash flow has consistently been in a net inflow range, and free cash flow has also been consistently positive. The current ratio is 0.98, quick ratio is 0.91, and there is some tightness in cash flow.

Debt-to-asset ratio is 59%, total assets at 15.5 billion, net income at 6.4 billion, accounts receivable at 5.3 billion which is a reasonable proportion. Goodwill and intangible assets have reached 5.5 billion, with a relatively high proportion.

The current P/E ratio is12Please choose cautiously (⭐️).

$Marcus & Millichap (MMI.US)$There is no relationship with Motorola, the English name is Marcus & Millichap, Inc., it should be called Marcus Millichap.

Revenue declined in both 2019 and 2020, while growing in the remaining 3 years. Especially in 2021, it increased by 81%, a 59% increase from the peak in 2018. Operating profit also decreased by 9.7% in 2017, matching the curves of net income and operating profit. In 2021, operating expenses increased by only 24%. Against the backdrop of an 80% revenue growth, operating profit increased 2.5 times to 0.19 billion.

Currently at a PE ratio of 13.4 times, it needs to continue growing on the basis of an 80% revenue in 2021 to be sustainable. It may be worth waiting for the next quarter's report to make a decision.

$The RMR Group (RMR.US)$Revenue decreased by 17% in 2020, only recovering by 3% in 2021. Net income declined by 60%, then recovered by 22% in 2021. In 2022Q1, operating profit increased by 11.6%, while net income decreased by 7.4%. The current PE ratio of 13.5 times requires better growth data support.

$CBRE Group (CBRE.US)$Revenue decreased by only 0.3% in 2020 over the past 5 years. Operating profit decreased by 27% in 2020, while net income decreased by 41.5% in 2020.

The income statement shows that in 2020, with revenue almost unchanged, the main operating cost increased by nearly 2%, 0.36 billion, leading to a decrease in gross profit of over 0.4 billion. However, in 2021, the growth rate of main operating costs is less than the increase in operating income by 3.2%, resulting in a significant increase in net profit of 143%. This can also be seen from the change in gross margin, which was 21.8% in 2019, 20.06% in 2020, and 22.22% in 2021.

5-year net profit growth rate25.8, the EPS curve and the net profit curve are quite consistent.

Debt-to-asset ratio of 58%, total assets of 22.1 billion, net income of 9.4 billion, accounts receivable of 6.8 billion, which is considered reasonable. Goodwill and intangible assets increased by 2.3 billion in 2021 to reach 7.4 billion. It was found that the increase was due to the acquisition of ING Groep. In recent years, CBRE Group has continuously invested in and acquired equity abroad, leading to a continuous increase in goodwill and intangible assets.

Operating income and free cash flow have grown over 5 years. The current ratio is 1.2, the quick ratio is 1.1, indicating a relatively safe cash flow.

Currently at a PE ratio of 15.6, a (⭐️⭐️) rating can be chosen.

$Cushman & Wakefield (CWK.US)$Revenue only decreased by 10.4% in 2020, operating profit almost plummeted by 98% in 2020, and net profit incurred losses for 3 years out of 5, only turning a profit in 2021. The income statement shows that other financial expenses were very high, reaching 0.18 billion.

The debt-to-asset ratio is relatively high, reaching 82%, total assets of 7.89 billion, net assets of 1.45 billion, while goodwill and intangible assets amount to 3 billion, with goodwill accounting for 2 billion.

Currently at a P/E ratio of 16.7 times, will determine after the quarterly report is released on May 5th.

$FRP Holdings (FRPH.US)$After a nearly 50% decline in revenue in 2018, it rebounded and increased, but operating profit has been decreasing in the past two years. Surprisingly, net income saw a significant increase in 2021. The three data trends are very contradictory. The income statement shows that the sale of securities in 2021 contributed the most to net income, reaching 56 million, but its sustainability is difficult to assess. Currently, a P/E ratio of 20 times requires more solid growth data.

Let's take a look at 6 stocks with P/E ratios above 25. This range is easy to determine, only need to retain rapidly growing or highly discounted stocks.

$eXp World (EXPI.US)$Quite unique, it is a cloud-based real estate economic company. I had thought about this project in 2015 but failed, never expected someone else to succeed.

Maintaining high revenue growth for 5 years, with growth rates below 100% for only two years. Operating profit turned around in 2020, but only increased by 8% in 2021. Net income surged by 162% in 2021, reaching 81.16 million.

The income statement shows that the main operating costs grew slightly faster than operating revenue, resulting in a mere 8% increase in operating profit. Upon further investigation, it became clear that the so-called cloud model has a gross margin of less than 8%, with slight changes in costs causing huge fluctuations in profit. The significant increase in net income in 2021 was due to a tax rebate of 47.5 million, which seems to be a subsidy for high-tech companies that cannot be relied upon indefinitely.

Currently, a price-earnings ratio of 29 times lacks real profit growth support.

$Transcontinental Realty Investors (TCI.US)$After a sharp 60% decrease in revenue in 2019, there has been little improvement. Operating profit has been negative for 3 years, and net income is also mediocre. Currently, a P/E ratio of 36 and P/B ratio of 0.97 are not very attractive.

$INDUS Realty Trust (INDT.US)$Revenue fluctuates without a clear trend, but operating profit fell sharply by 73.5% in 2020, only recovering by 16.4% in 2021. The net income was negative in 2020 but turned around in 2021, with a significant additional contribution to net income in 2021 from 'income from securities sales' reaching 22.27 million. Currently, a P/E ratio of 41 and P/B ratio of 1.9 are not very attractive.

$Firstservice (FSV.US)$Revenue has grown continuously for 5 years, but operating profit was in the negative in 2019 for one year. Net income follows a similar trend to operating profit. The income statement shows 'other operating expenses' of 0.314 billion in 2019, but it is unclear what this refers to.

With a debt-to-asset ratio of 59%, total assets of 2.5 billion, and net assets of 1 billion, goodwill and intangible assets have reached 1.2 billion.

Currently, a P/E ratio of 43 is not very appealing.

$CoStar (CSGP.US)$Revenue has grown continuously for 5 years, but operating profit declined by 20% in 2020, and net income dropped by 28% in 2020, not surpassing the 2019 level in 2021. The income statement shows that operating expenses increased by 0.3 billion (42%) in 2020, far exceeding the revenue growth rate (18.5%), leading to the decline in operating profit. In 2021, the proportion of operating expenses returned to normal, and operating profit also increased normally. Pre-tax net profit in 2021 is higher than in 2019, but income tax increased by 35 million compared to 2019, resulting in lower after-tax profit.

Currently, a P/E ratio of 83 indicates an excessively high valuation.

$Offerpad Solutions (OPAD.US)$It is a new stock listed in December 2020, with revenue growing rapidly. Operating profit and net income also turned losses in 2021. However, with a gross margin of only 10%, a 175 times PE ratio requires further growth data support.

Finally, let's take a look at 10 loss-making stocks with a PE ratio of less than 0.

$PropertyGuru (PGRU.US)$The 2021 financial report has not been released yet. The revenue decreased by 7.2% in 2020, but with too little data, it is impossible to determine.

$KE Holdings (BEKE.US)$The revenue growth is very good. The operating profit turned a significant loss in 2020, reaching 4 billion, but dropped to 0.45 billion in 2021. The net income incurred a loss of 0.5 billion in 2021. The income statement shows that the main operating costs proportion in 2021 increased significantly, with the gross margin decreasing from 23.92% to 19.6%. The proportion of operating expenses also increased, indicating a significant change in the overall business quality.

However, the income tax in 2021 did not decrease at all, directly resulting in a loss in net income.

Currently, a PB ratio of 1.37 does not have much attractiveness.

$RE/MAX Holdings (RMAX.US)$Revenue has grown overall in the past three years, but both operating profit and net income are declining rapidly. Currently, a PB ratio of 0.95 is not very attractive.

$The Real Brokerage (REAX.US)$Listed in 2021, revenue has grown in the past two years, but operating losses and net losses have expanded rapidly.

$Colliers International Group (CIGI.US)$Revenue and operating profit have grown rapidly except in 2020, but net income slipped into a loss range in 2021. Even if the net profit of 0.14 billion in 2019 is considered, the PE ratio has reached 38. If calculated with operating profit minus 25% tax, which is 0.3 billion, the PE ratio also reached 13%, lacking growth data support.

$Redfin (RDFN.US)$Its revenue has been growing rapidly for 5 years, but operating profit and net income have been consistently negative, with a trend of increasing losses.

$IRSA Propiedades Comerciales (IRCP.US)$It is an Argentine company, with net income fluctuating between profit and loss, lacking attractiveness.

$Opendoor Technologies (OPEN.US)$Net losses have been expanding over the past 3 years.

$Doma Holdings (DOMA.US)$2Net losses have been expanding over the years.

$WeWork (WE.US)$Net losses have been expanding over the past 3 years.

Overall, the real estate services sector has performed well apart from 2020, with significant fluctuations in profit margins and relatively high overall valuation. Today, a total of 2 stocks have been selected.

Investment index for the real estate services sector:⭐️
1. $CBRE Group (CBRE.US)$⭐️⭐️
2. $Jones Lang LaSalle (JLL.US)$⭐️

end

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