With a recent daily loss of 2.32% and a modest 3-month gain of 3.78%, CBRE Group Inc (CBRE, Financial) presents a complex investment profile. The Earnings Per Share (EPS) stands at 3.21, raising the question: Is CBRE Group fairly valued at its current market price? This article delves into the intrinsic valuation of CBRE Group, guided by the proprietary GF Value, to ascertain whether the stock holds fair value, is overpriced, or perhaps undervalued.
Company Overview
CBRE Group Inc (CBRE, Financial) is a global leader in real estate services, providing essential solutions to property owners, occupants, and investors worldwide. Its services encompass leasing, property and project management, and capital markets advisory. Notably, CBRE's investment management arm oversees more than $140 billion in assets, offering a range of strategic real estate investment options. Currently, with a market cap of $27 billion and a stock price of $88.13, the GF Value estimates the fair value of CBRE Group's shares at $96.13, suggesting a potential undervaluation in the market.
Understanding GF Value
The GF Value is a unique measure that estimates the true intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor, and future business performance expectations. For CBRE Group, the GF Value is set at $96.13, indicating that the stock is fairly valued if trading close to this figure. This intrinsic value serves as a benchmark for investors, suggesting that the current price of $88.13 might offer a reasonable entry point, assuming the company meets future performance estimates.
Financial Strength and Stability
Financial strength is critical in assessing a company's risk of capital loss. CBRE Group's cash-to-debt ratio stands at 0.17, positioning it below average compared to industry peers. Despite this, the overall financial strength of CBRE Group is rated as fair, with a score of 6 out of 10. Investors should consider both the opportunities and risks associated with this financial profile.
Profitability and Growth Prospects
Profitability is a cornerstone of investor returns, and CBRE Group has maintained profitability over the past decade. The company's operating margin currently stands at 3.84%, which, while lower than many competitors, underscores steady performance. Looking at growth, CBRE has achieved a 3-year average revenue growth rate of 13.2%, outperforming 66.04% of its industry counterparts. This suggests a robust potential for future value creation, aligning with the positive outlook depicted by the GF Value.
ROIC vs. WACC: A Financial Metric Comparison
An essential analysis in understanding a company's profitability is comparing its Return on Invested Capital (ROIC) against the Weighted Average Cost of Capital (WACC). For CBRE Group, the ROIC is 6.48, which unfortunately falls below its WACC of 10.89. This discrepancy indicates that the company is not generating sufficient returns on its investments relative to its capital costs, a situation that investors should monitor closely.
Conclusion
In conclusion, CBRE Group Inc (CBRE, Financial) appears to be fairly valued based on the GF Value, with strong growth prospects and consistent profitability. However, potential investors should be cautious of its financial strength and the current ROIC versus WACC metrics. For more detailed financial insights and to explore CBRE Group's historical financial performance, interested parties can view the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
