CBL & Associates Properties (CBL) Could Be 22% Overvalued Following Its Recent Pullback

CBL & Associates Properties (CBL) edged 0.9% higher at the last close to US$54.34, leaving investors weighing that move against a near 2% decline over the past month.

That recent softness sits against a much stronger backdrop for CBL & Associates Properties, with a 90 day share price return of 9.6% and a year to date share price gain of 47.1%. The 1 year total shareholder return of 89% points to momentum that has been building rather than fading.

Scan how CBL & Associates Properties fits alongside other real estate opportunities by reviewing our hand-picked list of solid balance sheet and fundamentals (23 results).

After a near 2% pullback over the month, yet with a sizeable gap to both analyst targets and intrinsic estimates, where does fair value for CBL & Associates Properties really sit now?

Price-to-Earnings of 7.9x: Is it justified?

At $54.34, CBL & Associates Properties trades on a P/E of 7.9x, which screens as good value relative to both peers and the broader US market.

The P/E ratio compares the current share price to earnings per share and, for a real estate owner like CBL & Associates Properties, it gives a quick read on how much investors are paying for each dollar of profit. A 7.9x multiple sits below the US market P/E of 18.2x and below the US Retail REITs industry average of 26.3x. This signals that investors are currently paying a lower price for each unit of earnings than they do elsewhere in the sector.

That discount comes even as CBL has recorded very strong recent earnings growth, with profits up 232.8% over the past year and net profit margins at 36.4% compared with 11.9% previously. Part of that jump is tied to large one off items and a high reported return on equity of 51.32% that is flattered by leverage. Forecasts point to earnings declining over the next three years, which can help explain why the multiple sits below sector levels and could influence where the ratio moves over time. Relative to an estimated fair P/E of 8x, the current 7.9x reading is also very close to the level the market could move towards if pricing lines up more tightly with that fair value estimate.

Against the peer group, the gap is far wider. The P/E of 7.9x sits well under the peer average of 53.9x and the US Retail REITs industry average of 26.3x. This is a strong signal that the market assigns CBL & Associates Properties a materially lower valuation multiple than comparable retail property owners even after a strong share price run.

Explore the SWS fair ratio for CBL & Associates Properties.

Result: Price-to-Earnings of 7.9x (UNDERVALUED)

Still, the sharp net income decline over the past year, along with reliance on US$588.1m of US based rental revenue, leaves CBL & Associates Properties exposed if tenant demand weakens.

Find out about the key risks to this CBL & Associates Properties narrative.

Another View on CBL & Associates Properties Using DCF

The low P/E hints at value, yet the SWS DCF model points the other way. At $54.34, CBL & Associates Properties trades above an estimated future cash flow value of $44.53, which frames the stock as overvalued on this second yardstick. Which signal should carry more weight in your analysis?

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 CBL & Associates Properties 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 33 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

Plenty of numbers point in different directions for CBL & Associates Properties, so act quickly, review the full picture and weigh the 3 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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