With working remotely being the norm, people no longer need to work out of an office building or space. Given the increased flexibility, acceptability of remote working, and hybrid work models, the real estate sector is witnessing an upswing in demand for their services.
To that end, it could be wise to buy real estate stocks FirstService Corporation (FSV), AMREP Corporation (AXR), and Comstock Holding Companies, Inc. (CHCI), which are poised to survive and thrive.
Even after the pandemic subsided, many companies announced that they would be working partially or fully remotely. Now that most corporates and employees have become accustomed to the ways and benefits of remote working, the hybrid office model will likely become the new normal in the coming years.
In this changing scenario, commercial property developers can remain profitable if they adapt to the new normal and incorporate emerging ideas and trends for the development of office building projects in the future. Flexible spaces, innovative design of managed spaces, and mixed-use development are some of the new models developers are creating.
In addition, owing to the growing population, availability of easy credit, changes to tax laws, increased desire for personal household space, and favorable government policies and regulations, the global real estate market is expected to grow at a CAGR of 5.3% to reach $48.92 trillion by 2031.
Given these factors, investors could look to buy fundamentally strong real estate services stocks FSV, AXR, and CHCI.
FirstService Corporation (FSV)
Headquartered in Toronto, Canada, FSV is a provider of residential property management and other essential property services to residential and commercial customers. It operates through two segments: FirstService Residential; and FirstService Brands.
On April 5, FSV Residential acquired Crossbridge Condominium Services Ltd., a leading residential management company in Ontario, Canada. The acquisition should cement the company’s leadership position in the Greater Toronto Area and accelerate its growth prospects.
On February 6, the company increased its quarterly dividend on the outstanding common shares by 11% to $0.225 per share. The dividend was paid to its shareholders on April 11, 2023.
Its annual dividend of $0.90 per share translates to a 0.62% yield on the current price, while its four-year average dividend yield is 0.54%. FSV’s dividend payments have grown at a CAGR of 21.4% and 10.6% over the past three and five years, respectively.
FSV’s revenue for the fourth quarter that ended December 31, 2022, increased 19% year-over-year to $1.02 billion. The company’s operating earnings rose 50.4% from the year-ago value to $67.46 million, while its adjusted EBITDA came in at $102.55 million, representing a 22.8% increase year-over-year. Moreover, its adjusted net earnings increased marginally from the prior-year quarter to $54.34 million and $1.22 per share.
The consensus EPS estimate of $0.78 for the first quarter (ended March 31, 2023) represents a 6.3% improvement year-over-year. The consensus revenue estimate of $966.29 million for the to-be-reported quarter represents a 15.8% increase from the same period last year. The company has an impressive earnings surprise history, as it surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 18.7% year-to-date to close the last trading session at $145.45. It is trading higher than its 50-day moving average of $139.10 and 200-day moving average of $130.79, indicating an uptrend.
FSV’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #5 out of 55 stocks in the Real Estate Services industry. In addition, it has an A grade for Growth and a B for Stability and Sentiment.
Beyond what I have stated above, we have also given FSV grades for Value, Momentum, and Quality. Get all the FSV ratings here.
AMREP Corporation (AXR)
AXR primarily engages in the real estate business, selling developed and undeveloped lots to homebuilders, commercial and industrial property developers, and others. The company operates through two segments: Land Development; and Homebuilding.
For the fiscal third quarter that ended January 31, 2023, AXR’s revenues amounted to $9.12 million, while its net income increased significantly year-over-year to $16.57 million. Its EPS also increased considerably from the year-ago value to $3.12. In addition, the company’s total assets came in at $113.14 million compared to $94.92 million as of April 30, 2022.
AXR’s revenue has grown at CAGRs of 53.2% and 10.4% over the past three and five years, respectively. Likewise, its total assets grew at a 5.2% CAGR over the past three years.
Over the past six months, the stock has gained 36.3% to close the last trading session at $15.05, higher than its 50-day and 200-day moving averages of $13.59 and $12.68, respectively.
AXR’s promising outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
It also has a B grade for Value and Sentiment. Within the same industry, it is ranked #3. To see the other ratings of AXR for Growth, Momentum, Stability, and Quality, click here.
Comstock Holding Companies, Inc. (CHCI)
CHCI develops, operates, and manages mixed-use and transit-oriented properties primarily in the Washington, D.C. metropolitan area. The company also provides real estate development and management services.
On March 9, CHCI signed a lease agreement with Clyde’s Restaurant Group, a subsidiary of Graham Holdings Company (GHC), to open Ebbitt House, a stylish modern spin on Old Ebbitt Grill, at its Reston Station development.
Tim Steffan, COO of CHCI, said, “The addition of Ebbitt House to our already remarkable merchandising lineup further strengthens Reston Station as a ‘first thought’ dining and entertainment destination in Northern Virginia.”
CHCI’s revenue increased 19.8% year-over-year to $9.30 million in the fiscal fourth quarter that ended on December 31, 2022. Its income from operations grew 60.6% from the year-ago value to $1.60 million, while its net income improved 39% year-over-year to $1.31 million.
The company’s net income per share increased 18.2% from its year-ago value to $0.13. In addition, its adjusted EBITDA increased 58.4% year-over-year to $1.86 million.
Over the past three years, CHCI’s revenue and EBITDA have grown at CAGRs of 15.8% and 48.5%, respectively. Likewise, its EPS grew at a CAGR of 93.2% over the same period.
Shares of CHCI have gained 13.4% over the past six months to close the last trading session at $4.41.
CHCI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our POWR Ratings system. CHCI has a B grade for Value, Momentum, Sentiment, and Quality. Among the 55 stocks in the same industry, it is ranked #2.
Click here to see the additional POWR Ratings for CHCI (Growth and Stability).
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FSV shares were trading at $143.68 per share on Tuesday afternoon, down $1.77 (-1.22%). Year-to-date, FSV has gained 17.43%, versus a 6.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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