Allied Properties Real Estate Investment Trust (TSX:AP.UN) has seen a steady climb in its share price recently, gaining around 27% over the past three months. Investors seem focused on its strong rebound after some challenging periods.
See our latest analysis for Allied Properties Real Estate Investment Trust.
Allied Properties’ share price momentum over the past three months stands out, but it comes after a more modest 1-year total shareholder return of 25%. There is a sense that optimism around the company’s recovery and income potential is beginning to build again.
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With shares rallying but valuations still below analyst targets, investors may wonder if Allied Properties is offering a genuine chance to get in before a full turnaround or if the market is already reflecting all future optimism.
Allied Properties is currently trading at a Price-to-Sales (P/S) ratio of 5.2x, putting it at a notable premium to both industry and peer averages. With its last close at CA$22.27, this elevated multiple suggests investors are pricing in a strong recovery or significant growth prospects.
The P/S ratio measures how much investors are willing to pay for each dollar of the company’s sales. It is a commonly used metric for real estate investment trusts, especially when earnings are negative or volatile, as it offers a lens on market expectations for future top-line expansion and operational turnaround potential.
However, with Allied Properties’ P/S ratio standing at 5.2x, the stock is priced substantially higher than the North American Office REITs industry average of 2.3x and also above the estimated fair P/S ratio of 3.5x. This significant gap could either point to optimism about Allied’s unique position or highlight an overstretched valuation that may revert if company fundamentals don’t deliver.
Explore the SWS fair ratio for Allied Properties Real Estate Investment Trust
Result: Price-to-Sales of 5.2x (OVERVALUED)
However, Allied Properties faces ongoing risks from negative net income and historically weak longer-term returns. These factors could challenge the current momentum if fundamentals do not improve.
Find out about the key risks to this Allied Properties Real Estate Investment Trust narrative.
While the price-to-sales ratio points to a premium valuation, our DCF model suggests a different angle. According to this method, Allied Properties is trading about 22% below our estimated fair value. This indicates there might be more upside potential than the current market multiple signals. Could the SWS DCF model be picking up on recovery drivers the market is missing?
