Future Market Networks Limited (NSEI:FMNL), a INR₹8.40B small-cap, is a real estate company operating in an industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios. Real estate analysts are forecasting for the entire industry, a strong double-digit growth of 11.40% in the upcoming year , and a robust short-term growth of 17.27% over the next couple of years. This rate is larger than the growth rate of the Indian stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Future Market Networks is lagging or leading in the industry. Check out our latest analysis for Future Market Networks
What’s the catalyst for Future Market Networks’s sector growth?
Not every category of real estate is likely to be impacted the same by macroeconomic factors such as interest rate hikes, and not all locations are primed to grow. So, investors must remain cautiously optimistic and analyse the fundamentals of the underlying industry. Over the past year, the industry saw growth in the teens, beating the Indian market growth of 12.80%. Future Market Networks lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Future Market Networks may be trading cheaper than its peers.
Is Future Market Networks and the sector relatively cheap?
Real estate companies are typically trading at a PE of 26x, in-line with the Indian stock market PE of 27x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 4.64% compared to the market’s 9.83%, potentially indicative of past headwinds. Since Future Market Networks’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Future Market Networks’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Future Market Networks has been a real estate industry laggard in the past year. If your initial investment thesis is around the growth prospects of Future Market Networks, there are other real estate companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Future Market Networks fits into your wider portfolio and the opportunity cost of holding onto the stock.