Apart from PS and PB, is there any other recommended valuation for property developer? As I understand these companies are cyclical in nature, DCF and PCFO does not seem to be able to address this.
Moreover I’m also facing challenge with PE as well. While using the median PE multiply trailing 4 quarters of EPS and due to their Net Debt per share, the intrinsic value is -0.25 .
Would love your input on this. Thank you!
Just sharing my thoughts, if you are using a earnings/cashflow metric on a lumpy income/cyclical company, you might want to take an average or normalise the earnings. Might help to smoothen it for comparison.
PB is the best valuation method on Property Developer business model. On the other hand, you need to really understand the projects that the property developer are doing for instance the condo or apartment that they are building. Fact like, how many units are sold, how much they are expected to earn and when are their completion date.
The ideal scenario is to purchase the property developer before they complete the project and the company still at low PB ratio. After the project completed, they will start to record their revenue, earning start to flow in and PB ratio will start to increase. It is not advisable to hold property developer for long term, best is to sell when they complete the project as their revenue and earnings can be lumpy.
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