Community Healthcare Trust Incorporated (NYSE:CHCT) is a US$535.5m real estate investment trust (REIT), which is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Community Healthcare Trust is lagging or leading in the industry.
What’s the catalyst for Community Healthcare Trust’s sector growth?
Issues around rate hikes and yield changes have made investors sceptical of REITs. Over the past year, the industry saw growth of 8.2%, though still underperforming the wider US stock market. Community Healthcare Trust leads the pack with its impressive earnings growth of 49.8% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Community Healthcare Trust poised to deliver a 88.4% growth over the next couple of years compared to the industry’s -0.5%. This growth may make Community Healthcare Trust a more expensive stock relative to its peers.
Is Community Healthcare Trust and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 27.87x, higher than the rest of the US stock market PE of 19.8x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 6.6% compared to the market’s 10.6%, which may be indicative of past headwinds. On the stock-level, Community Healthcare Trust is trading at a higher PE ratio of 101x, making it more expensive than the average REIT stock. In terms of returns, Community Healthcare Trust generated 2.3% in the past year, which is 4.3% below the REIT sector.
Community Healthcare Trust’s ability to deliver earnings growth in the past aligns with that of the broader market, however its relative value seems to be above the rest of the industry. If Community Healthcare Trust has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other real estate companies. If you’re looking for proven ability to generate growth, it seems other industry peers are also delivering the same rate. However, before you make a decision on the stock, I suggest you look at Community Healthcare Trust’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has CHCT’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Community Healthcare Trust? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.