Among the more impressive movers in the TSX, Colliers International (TSX: CIGI) is one company that has become a very divisive stock among some investors.
There are good reasons for such a view. Now trading at more than 70 times trailing earnings, CIGI stock recently surged more than 50% since its lows a little more than four months ago. Those who have stuck with this name or bought closer to the bottom may be enticed to sell.
Let’s dive into whether that’s a good idea.
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Growth is the key story
Colliers International’s status as a key player in the commercial real estate sector is its own headwind, in and of itself. Given where the commercial real estate market is in terms of inventory, sales volumes and future growth expectations, there are reasons why this stock took a significant dip in April on tariff-related news.
That said, despite compressed margins in past quarters, Colliers reported relatively strong growth this past quarter. Revenue growth came in at 18% year-over-year, with expectations for mid-teens growth on a go-forward basis.
Now, earnings did continue to see some stress. That’s going to make this stock a more difficult one for the average investor to assess.
But overall, the company’s balance sheet and fundamentals do appear to be strong. For those looking for exposure to a sector that’s been beaten down of late (Colliers is still a ways from its record high), this is an intriguing stock.
What to do?
For investors with a long-term investing time horizon, it’s important to look through the near-term pain this stock has seen in the past. That’s not to say investors should ignore the risk associated with this particular stock or the sector it operates in. But looking past its recent compressed EPS numbers in past quarters, Colliers’ forward multiple actually comes down below 25 times.
At that level, this stock does seem to be reasonably valued. While there are other high-quality options in this space, I think this stock looks like a hold to me. If I owned it, I wouldn’t sell, but I may be a bit hesitant to step into this stock right now and would be patient hoping for a pullback before jumping in.
