Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 stocks made the list for top value stocks in the REITs - Commercial industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued REITs - Commercial Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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4 Undervalued REITs - Commercial Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the REITs - Commercial industry for Thursday, August 15, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the REITs - Commercial industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

CBL & Associates Properties, Inc.’s Value Grade

Value Grade:

CBL & Associates Properties, Inc. is a self-managed, self-administered, fully integrated real estate investment trust (REIT). The Company owns, develops, acquires, leases, manages, and operates various properties. Its segments include Malls and All Other. The Malls segment includes malls, lifestyle centers and outlet centers. The All Other segment includes open-air centers, outparcels, office buildings, hotels, self-storage facilities, corporate-level debt and the Management Company. The Company primarily conducts its business through CBL & Associates Limited Partnership (the Operating Partnership), which is a variable interest entity. It owns two qualified REIT subsidiaries: CBL Holdings I, Inc. and CBL Holdings II, Inc. It owns and manages a portfolio, which is comprised of approximately 94 properties totaling 58.5 million square feet across 22 states, including 56 enclosed malls, outlet centers and lifestyle retail centers as well as more than 30 open-air centers and other assets.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

CBL & Associates Properties, Inc. has a Value Score of 61, which is considered to be undervalued.

When you look at CBL & Associates Properties, Inc.’s price-to-sales ratio at 1.52 compared to the industry median at 4.85, this company has a lower price relative to revenue compared to its peers. This could make CBL & Associates Properties, Inc.’s stock more attractive for value investors.

CBL & Associates Properties, Inc.’s price-earnings ratio is 28.07 compared to the industry median at 31.94. This means it has a lower share price relative to earnings compared to its peers. This could make CBL & Associates Properties, Inc. more attractive for value investors.

Now, let’s assess CBL & Associates Properties, Inc.’s EV/EBITDA ratio, also known as enterprise multiple. At 8.8, when compared to the industry median of 16.1, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. CBL & Associates Properties, Inc.’s shareholder yield is higher than its industry median ratio of 3.24%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. CBL & Associates Properties, Inc.’s price-to-book ratio is higher than its industry median ratio of 1.36. This could make CBL & Associates Properties, Inc. less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at CBL & Associates Properties, Inc.’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. CBL & Associates Properties, Inc.’s price-to-free-cash-flow ratio is lower than its industry median ratio of 39.35. This could make CBL & Associates Properties, Inc. more attractive because the lower P/FCF ratio indicates that CBL & Associates Properties, Inc. is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Franklin Street Properties Corp’s Value Grade

Value Grade:

Franklin Street Properties Corp. is a real estate investment trust (REIT). The Company is focused on commercial real estate investments primarily in office markets. The Company operates through the real estate operations segment. The Company's investment objectives are to create shareholder value by increasing revenue from rental, dividend, interest and fee income and net gains from sales of properties and increase the cash available for distribution in the form of dividends to its stockholders. Its real estate operations market involves real estate rental operations, leasing, secured financing of real estate and services provided for asset management, property management, property acquisitions, dispositions and development. It owns and operates a portfolio of real estate consisting of approximately 18 properties. The Company's portfolios are located in Dallas, Denver, Houston and Minneapolis.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Franklin Street Properties Corp has a Value Score of 86, which is considered to be undervalued.

Franklin Street Properties Corp’s price-to-book ratio is higher than its peers. This could make Franklin Street Properties Corp less attractive for value investors when compared to the industry median at 1.36.

You can read more about Franklin Street Properties Corp’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Lightstone Value Plus Reit V Inc’s Value Grade

Value Grade:

Lightstone Value Plus REIT V, Inc. is a real estate investment trust (REIT). The Company is formed primarily to acquire and operate commercial real estate and real estate-related assets. The Company holds interests in various commercial properties, such as office, industrial, retail, hospitality, multifamily, and student housing, and other real estate-related investments, such as mortgage loans and mezzanine loans. The Company's business is conducted through Lightstone REIT V OP LP (Operating Partnership). The Company has eight wholly owned real estate investments (multi-family apartment complexes) and one real estate-related investment (mezzanine loan). The Company’s properties include Arbors Harbor Town, Parkside Apartments, Flats at Fishers, Axis at Westmont, Valley Ranch Apartments, Autumn Breeze Apartments, BayVue Apartments, and Citadel Apartments. The Company’s business is externally managed by LSG Development Advisor LLC (the Advisor).

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Lightstone Value Plus Reit V Inc has a Value Score of 62, which is considered to be undervalued.

Lightstone Value Plus Reit V Inc’s price-earnings ratio is 4.5 compared to the industry median at 31.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Lightstone Value Plus Reit V Inc more attractive for value investors.

Lightstone Value Plus Reit V Inc’s price-to-book ratio is higher than its peers. This could make Lightstone Value Plus Reit V Inc less attractive for value investors when compared to the industry median at 1.36.

You can read more about Lightstone Value Plus Reit V Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Piedmont Office Realty Trust, Inc.’s Value Grade

Value Grade:

Piedmont Office Realty Trust, Inc. is a fully integrated, self-managed real estate investment trust (REIT). The Company is an owner, manager, developer, redeveloper, and operator of Class A office properties located primarily in major United States Sunbelt markets. The Company conducts business through its wholly owned subsidiary, Piedmont Operating Partnership, L.P. (Piedmont OP). It owns and operates about 51 in-service office properties comprised of approximately 17 million square feet of primarily Class A office space which are 87.1% leased. It has one redevelopment asset comprising about 127,000 square feet in Orlando, Florida. The Company’s portfolio of properties is primarily located in various metropolitan areas, including Atlanta, Dallas, Northern Virginia/Washington, D.C., Boston, Orlando, Minneapolis, and New York, and others.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Piedmont Office Realty Trust, Inc. has a Value Score of 79, which is considered to be undervalued.

Piedmont Office Realty Trust, Inc.’s price-to-book ratio is higher than its peers. This could make Piedmont Office Realty Trust, Inc. less attractive for value investors when compared to the industry median at 1.36.

You can read more about Piedmont Office Realty Trust, Inc.’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other REITs - Commercial Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about REITs - Commercial stocks as well as other industrys.

Choosing Which of the 4 Best REITs - Commercial Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• CBL & Associates Properties, Inc. stock has a Value Grade of B.
• Franklin Street Properties Corp stock has a Value Grade of A.
• Lightstone Value Plus Reit V Inc stock has a Value Grade of B.
• Piedmont Office Realty Trust, Inc. stock has a Value Grade of B.

Now that you have a bit more background about each of the 4 undervalued stocks in the REITs - Commercial industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About REITs - Commercial Stocks

Want to learn more about REITs - Commercial stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 4 Undervalued REITs - Commercial Stocks for Thursday, August 15
• 3 Undervalued REITs - Commercial Stocks for Monday, August 12
• 3 Undervalued REITs - Commercial Stocks for Friday, August 09
• 3 Undervalued REITs - Commercial Stocks for Thursday, August 08

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.