Boardwalk Real Estate Investment Trust (TSX:BEI.UN) Expands With DGAM Co Ownership, Is It Still Below Fair Value?

Boardwalk Real Estate Investment Trust (TSX:BEI.UN) is back in focus after its latest update on affordable housing operations, new co ownership plans in Western Canada, recent asset sales and a multi tranche share buyback.

See our latest analysis for Boardwalk Real Estate Investment Trust.

At a latest share price of CA$65.8, Boardwalk Real Estate Investment Trust has seen a modest 1-day share price return of 1.46%, while its 1-year total shareholder return declined 6.22%, suggesting recent buybacks and the DGAM co ownership news have yet to translate into stronger overall investor gains.

If this update has you thinking about where else capital might work hard for you, it could be worth scanning opportunities in 3 top founder-led companies

Boardwalk Real Estate Investment Trust’s recent move sits between two stories. One is a business investing in buybacks and co ownership to support long term growth. The other is sentiment cooling after recent losses. How does the valuation stack up now?

Preferred P/E of 54.6x: Is it justified?

On current numbers, Boardwalk Real Estate Investment Trust looks expensive on earnings. The units trade at a P/E of 54.6x, which sits well above both peer and broader residential REIT benchmarks, even after the recent pullback to CA$65.8.

The P/E ratio links the price you pay today to the earnings the trust currently generates. For a residential REIT like Boardwalk Real Estate Investment Trust, it gives a quick read on how much investors are paying for each dollar of profit, against a backdrop of relatively steady rent based revenue and sector specific financing conditions.

Here the P/E of 54.6x suggests the market is paying a high price for each unit of earnings. That sits uncomfortably next to a recent 12 month profit margin of 9%, a one off loss of CA$169.5m in the last reported period, low return on equity of 1.2% and interest payments that are not well covered by earnings. Earnings have also declined sharply over the past year, which makes the current multiple look demanding if those earnings do not quickly recover.

Compared with the global residential REIT industry average P/E of 23.5x, Boardwalk Real Estate Investment Trust trades on more than double the multiple. It is also expensive relative to a peer average P/E of 14x. That is a clear premium against both sector and peer benchmarks, with no fair ratio available yet as a reference point for where the multiple could realistically settle over time.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-earnings of 54.6x (OVERVALUED)

However, risks such as earnings pressure from interest costs and the recent one off loss of CA$169.5m could challenge the Boardwalk Real Estate Investment Trust premium story.

Find out about the key risks to this Boardwalk Real Estate Investment Trust narrative.

Another view on Boardwalk Real Estate Investment Trust valuation

The headline P/E of 54.6x makes Boardwalk Real Estate Investment Trust look expensive on earnings. Yet our DCF model suggests the units trade about 20.1% below an estimated fair value of CA$82.37, which points to undervaluation instead. Which signal matters more for you?

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 Boardwalk Real Estate Investment 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 mixed signals around Boardwalk Real Estate Investment Trust leave you on the fence, it makes sense to move quickly and weigh the full picture yourself. To see what stands out most on both sides of the ledger, take a closer look at the 2 key rewards and 4 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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