TCO P/NAV Spread to REIT Sector Below -2 Standard Deviations over 1-, 2-, 3- and 10-yr time frames

  • TCO was below the lower end of its 10-year 95% confidence interval vs. the REIT sector on P/NAV as of yesterday's close* for the first in the past 10 years.
  • According to our historical data set, TCO has been at these levels once before (January 2005). Following the last instance at these levels, TCO returned +24%, +4% and +38% on an absolute price basis over the subsequent 6, 12 and 24-months.
  • On a relative price basis, the stock returned +11%, -11.% and -4% over the subsequent 6, 12 and 24 months.
  • On a 5-yr basis, the stock is trading below -1.75 standard deviations.

Some possible conclusions to draw from the relative valuation signal and trend:

  • TCO has shifted to a new relative trading range (quite possible given the persistence of the trend);
  • TCO is at its cyclical low point (seems unlikely given the length of time at these levels);
  • Consensus NAV estimates for the stock are incorrect, thus making the stock appear cheaper than it actually is (consensus NAV estimates have been known to be elevated for TCO at certain points historically);
  • TCO is at an attractive entry level for investors with longer-term investment horizons (historically, when stocks of TCO's caliber have reached these low levels, they have generally represented attractive buying opportunities for investors with 1 year time horizons or longer).

* originally published to DISCERN Real Estate subscribers 3/16

 

TCO P/NAV Spread to REIT Sector (10-yr 95% Confidence Interval)

TCO P/NAV Spread to REIT Sector (1-yr 95% Confidence Interval)

TCO P/NAV Spread to REIT Sector (2-yr 95% Confidence Interval)

TCO P/NAV Spread to REIT Sector (3-yr 95% Confidence Interval)

TCO P/NAV Spread to REIT Sector (5-yr 95% Confidence Interval)

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