Yahoo Finance 1 Value Stock Down 25% to Buy Right Now
Written by Daniel Da Costa at The Motley Fool Canada
With interest rates remaining relatively high for the time being, and after the economy faced several headwinds over the last year, there are plenty of attractive value stocks for investors to buy right now.
We aren’t out of the woods yet, and there could certainly still be a recession. However, if you focus on finding high-quality stocks to buy for the long haul and consider the fact that interest rates are expected to start coming down soon, now is an excellent time to take advantage of some of the discounts available across the market.
That’s why one of the best value stocks to buy now is Morguard North American Residential REIT (TSX:MRG.UN), a residential REIT with properties diversified all across North America.
Why is Morguard one of the best value stocks to buy now?
There are several reasons to buy Morguard for the long haul, including its industry and impressive portfolio, and the fact that it trades at an appealing discount.
Although the stock is down just shy of 20% from its 52-week high, it’s down by more than 25% from its all-time high back in March of 2022. So not only can you buy Morguard undervalued, but because it’s also an impressive dividend stock, when you buy it at a discount, you lock in a higher yield.
Plus, if the stock takes longer than expected to recover to fair value, you will still earn an attractive return from the yield as you buy and hold for the long haul.
An appealing discount and attractive dividend yield are certainly compelling, but they are far from the only reasons to buy a stock. In Morguard’s case, another major consideration is that it’s a residential real estate stock, one of the most defensive industries in the economy, making it a stock you can hold with confidence no matter what the economic environment.
Furthermore, Morguard’s portfolio is extremely well diversified, with properties located in nine different states south of the border, as well as in Ontario and Alberta. This diversification is key, as it helps to mitigate against any regional risks in the real estate sector and has been crucial for Morguard’s growth in recent years, as certain states in the southern U.S. have seen a massive jump in average monthly rents.
In fact, in just the last two years, Morguard has seen a more than 34% jump in revenue. That’s impressive growth for a residential real estate stock.
Furthermore, its funds from operations (FFO) per share have also jumped considerably, up roughly 20% over that stretch. That’s also impressive growth, especially when you consider the significant increase in costs over the last two years as inflation was surging, showing why it’s one of the top stocks to buy now, especially while it offers so much value.
How cheap is Morguard Residential REIT today?
With Morguard trading at just over $15 per unit and roughly 25% off its all-time high, it’s certainly one of the top value stocks to buy now.
Currently, Morguard is trading at a forward price to FFO (P/FFO) ratio of just 9.2 times. That’s much lower than its three- and five-year average P/FFO ratios of 12.3 and 13 times, respectively.
For reference, if Morguard were to rally back to its historical average, the REIT would be trading around $21 per unit, roughly 40% higher than where it trades today.
It’s also worth noting that Morguard offers a yield of roughly 4.85% today, compared to its five-year average of 4.22%.
Therefore, while this impressive residential REIT offers such a compelling discount and a higher-than-normal yield, it’s certainly one of the top value stocks to buy now and hold for years to come.
The post 1 Value Stock Down 25% to Buy Right Now appeared first on The Motley Fool Canada.
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Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Morguard North American Residential Real Estate Investment Trust. The Motley Fool has a disclosure policy.
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