Vital Infrastructure Property Trust (TSX:VITL.UN) Buys Brooklyn Health Hub, Is The Valuation Still Cheap?

Vital Infrastructure Property Trust (TSX:VITL.UN) is back in focus after agreeing to acquire the East New York Health Hub in Brooklyn for $126.7 million, a fully leased outpatient facility with long-term healthcare tenants.

See our latest analysis for Vital Infrastructure Property Trust.

Vital Infrastructure Property Trust’s CA$5.81 unit price sits on the back of a 13.04% year to date share price return and a 29.29% total shareholder return over the past year, suggesting recent momentum has picked up as investors weigh the Brooklyn acquisition and ongoing monthly distributions.

If the East New York Health Hub deal has you thinking about essential infrastructure themes, it could be a good moment to scan other power grid technology opportunities through the 35 power grid technology and infrastructure stocks

Vital Infrastructure Property Trust has enjoyed a strong recent run and just added a sizable Brooklyn asset to its portfolio, so the real question now is whether the current unit price still leaves enough potential for new buyers.

Price to Sales of 3.4x: Is it justified?

On current numbers, Vital Infrastructure Property Trust trades at a P/S of 3.4x, which screens as undervalued compared with both its peers and an estimated fair level for the stock.

The P/S ratio compares the company’s market value with its revenue, which can be a useful yardstick for a healthcare REIT like Vital Infrastructure Property Trust where earnings are currently negative and net income is not a clean indicator of underlying property cash flows.

Simply Wall St’s checks suggest the units are trading at 37.7% below an internal estimate of fair value based on the SWS DCF model. The current 3.4x P/S is judged to be good value versus a fair P/S of 3.6x. In that context, the market price implies a lower revenue multiple than this fair ratio, which is a level it could reasonably move toward if sentiment and fundamentals stay aligned with those model assumptions.

Relative to peers, the 3.4x P/S also stands below the 3.5x peer average and well below the 6.9x Global Health Care REITs industry average. This signals that investors are currently paying a lower revenue multiple for Vital Infrastructure Property Trust than for many comparable healthcare real estate stocks, despite similar sector exposure.

Explore the SWS fair ratio for Vital Infrastructure Property Trust

Result: Price-to-Sales of 3.4x (UNDERVALUED)

However, Vital Infrastructure Property Trust still faces risks around its annual revenue decline of 19.09% and a reported net loss of CA$55.807 million, which could challenge the current valuation story.

Find out about the key risks to this Vital Infrastructure Property Trust narrative.

Another View: What the SWS DCF Model Says About Vital Infrastructure Property Trust

The SWS DCF model points to a fair value of CA$9.32 per unit for Vital Infrastructure Property Trust, compared with the current CA$5.81 market price. This implies the units screen as undervalued on future cash flow estimates as well as on the 3.4x P/S ratio. With two methods pointing in the same direction, the real puzzle for you is whether the risks around losses and revenue trends justify that discount or not.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Vital Infrastructure Property Trust for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 5 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

If the balance of risks and rewards for Vital Infrastructure Property Trust in this article feels finely poised, act quickly, review the data, and come to your own conclusion by checking the 3 key rewards and 2 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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