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Should Value Investors Choose City Office REIT (CIO) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s City Office REIT, Inc. (CIO - Free Report) , or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, City Office REIT has a trailing twelve months PE ratio of 9.36, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 28.13. If we focus on the long-term PE trend City Office REIT’s PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Image Source: Zacks Investment Research
However, the stock’s PE also compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 18.28. At the very least, this indicates that the stock is slightly overvalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that City Office REIT has a forward PE ratio (price relative to this year’s earnings) of just 9.22, so it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, City Office REIT has a P/S ratio of about 3.32. This is substantially lower than the S&P 500 average, which comes in at 5.34 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
Broad Value Outlook
In aggregate, City Office REIT currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes City Office REIT a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio for City Office REIT comes in at 7.92, which is better than the industry average of 16.47. Clearly, CIO is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though City Office REIT might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of C and Momentum Score of B. This gives City Office REIT a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. This has had a noticeable impact on the consensus estimate, as the current year consensus estimate improved 5.6% in the past two months, whereas the full year 2022 estimate improved 3.8% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Even with better estimate trends the stock has a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.
Bottom Line
City Office REIT is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the sector has clearly underperformed the market at large, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Should Value Investors Choose City Office REIT (CIO) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s City Office REIT, Inc. (CIO - Free Report) , or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, City Office REIT has a trailing twelve months PE ratio of 9.36, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 28.13. If we focus on the long-term PE trend City Office REIT’s PE level puts it below its midpoint over the past five years. Moreover, the current level is fairly below the highs for this stock, suggesting it might be a good entry point.
Image Source: Zacks Investment Research
However, the stock’s PE also compares favorably with the Zacks Finance sector’s trailing twelve months PE ratio, which stands at 18.28. At the very least, this indicates that the stock is slightly overvalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that City Office REIT has a forward PE ratio (price relative to this year’s earnings) of just 9.22, so it is fair to expect an increase in the company’s share price in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, City Office REIT has a P/S ratio of about 3.32. This is substantially lower than the S&P 500 average, which comes in at 5.34 right now. Also, as we can see in the chart below, this is somewhat below the highs for this stock in particular over the past few years.
Image Source: Zacks Investment Research
Broad Value Outlook
In aggregate, City Office REIT currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes City Office REIT a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the P/CF ratio for City Office REIT comes in at 7.92, which is better than the industry average of 16.47. Clearly, CIO is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though City Office REIT might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of C and Momentum Score of B. This gives City Office REIT a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. This has had a noticeable impact on the consensus estimate, as the current year consensus estimate improved 5.6% in the past two months, whereas the full year 2022 estimate improved 3.8% in the past two months. You can see the consensus estimate trend and recent price action for the stock in the chart below:
City Office REIT, Inc. Price and Consensus
City Office REIT, Inc. price-consensus-chart | City Office REIT, Inc. Quote
Even with better estimate trends the stock has a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.
Bottom Line
City Office REIT is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the sector has clearly underperformed the market at large, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for estimates, analyst sentiment and broader factors to turn around in this name first, but once that happens, this stock could be a compelling pick.