EQB (TSX:EQB) is a Toronto-based company that provides personal and commercial banking services to retail and commercial customers in Canada. Shares of this top alternative lender have increased 6.1% month over month as of close on May 3. The Canadian real estate stock is up 9.4% so far in 2023. Investors who want to see more can play with the interactive price chart below.
Today, I want to discuss why EQB is a great value buy in early May 2023. Moreover, I want to look at the current state of the Canadian real estate market. Let’s dive in.
The Canada housing market is showing signs of recovery in the spring season
Historically, Canadian real estate has enjoyed some of its most robust activity during the spring season. This is a season of rebirth, hope, and looking forward. It stands to reason that prospective home buyers especially feel the itch to make moves in the spring.
The spring season of 2023 has offered a moment of renewal for the struggling Canada housing market. Toronto, Canada’s most populous city and largest real estate market, saw a strong spike in activity in the month of April. The Toronto Regional Real Estate Board revealed on May 3 that average prices jumped 4% month over month to $1.108 million. Meanwhile, the Toronto real estate market posted 9% growth compared to the month of March. However, both prices and sales were still down 7% and 5%, respectively, compared to the prior year.
Some brokers have stated that bidding wars have found their way back to the norm in the spring, which is a positive sign for the housing market. Supply remains a huge issue for housing markets in the Greater Toronto Area (GTA) and the country at large. This, combined with record-high immigration levels, should provide a strong floor for a housing market that is battling aggressive interest rate tightening.
Here’s why EQB is one of my favourite real estate stocks
EQB is a Canadian real estate stock that has been a fantastic performer since the March 2020 stock market correction. At the time, investors were concerned that the COVID-19 pandemic would deal a mortal blow to Canada’s red-hot real estate market. On the contrary, unprecedented monetary easing spurred Canadians to leap head-first into housing. Shares of this real estate stock fell below the $25 mark in March 2020. EQB closed at $62.38 on Wednesday, May 3.
This company unveiled its first-quarter fiscal 2023 earnings on Tuesday, May 2. Adjusted revenue climbed 40% year over year to $264 million. EQB reported adjusted net income of $101 million — up 10% compared to the first quarter of fiscal 2022. Indeed, the company saw its profit margins bolstered by higher interest rates. Moreover, adjusted diluted earnings per share (EPS) rose 7% over the fourth quarter of 2022 to $2.62.
EQB is an undervalued real estate stock right now. Here’s why
Investors should be encouraged by EQB’s first-quarter results. However, the company will still face tough tests going forward as more Canadians will be subjected to higher borrowing rates, as renewals come trickling in. Regardless, EQB has demonstrated that higher interest rates can be a boon for its earnings in the near term.
Shares of this real estate stock currently possess an attractive price-to-earnings ratio of 8.2. Moreover, EQB offers a quarterly dividend of $0.37 per share. That represents a 2.2% yield.