Yahoo Finance Is Redfin Corporation (NASDAQ:RDFN) Cheap And High Growth?
Redfin Corporation (NASDAQ:RDFN), a US$1.5b small-cap, is a real estate company operating in an industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios. Real estate analysts are forecasting for the entire industry, a somewhat weaker growth of 2.7% in the upcoming year , and a low 1.9% growth over the next couple of years. This rate is below the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Redfin is a laggard or leader relative to its real estate sector peers.
See our latest analysis for Redfin
What’s the catalyst for Redfin’s sector growth?
Not every category of real estate is likely to be impacted the same by macroeconomic factors. Investors should remain cautiously optimistic of the underlying industry. In the past year, the industry delivered growth in the forties, beating the US market growth of 18%. Redfin leads the pack with its impressive earnings growth of 74% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Redfin poised to deliver a 49% growth over the next couple of years compared to the industry’s 2.7%. This growth may make Redfin a more expensive stock relative to its peers.
Is Redfin and the sector relatively cheap?
Real estate companies are typically trading at a PE of 19.8x, relatively similar to the rest of the US stock market PE of 20.16x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 12% on equities compared to the market’s 10%. Since Redfin’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Redfin’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Redfin’s industry-beating future is a positive for investors. If Redfin has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the real estate industry. However, before you make a decision on the stock, I suggest you look at Redfin’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 RDFN’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 Redfin? 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 editorial-team@simplywallst.com.
