Last year, real estate companies were hard hit due to the Fed’s massive interest rate hikes. The valuations of these companies are sitting at significant discounts compared to private real estate benchmarks. However, potential tailwinds, such as the slowing pace of interest rate hikes, could propel the real estate investment industry’s prospects.

Transcontinental Realty Investors, Inc. (TCI - Get Rating) holds a diverse portfolio of equity real estate located across the United States. The company engages in real-estate investment through direct ownership, leases, and partnerships.

The stock has gained 13.1% over the past year and 12.5% over the past six months to close its last trading session at $44.82. It is trading higher than its 50-day moving average of $42.23 and 200-day moving average of $41.77.

Here are the factors that could influence TCI’s performance in the upcoming months:

Solid Bottom Line

For the quarter that ended September 30, TCI’s total revenue decreased 17.1% year-over-year to $8.32 million. However, net income attributable to the company increased significantly from the prior-year quarter to $378.35 million. Its EPS also improved considerably from the prior-year period to $43.79.

Impressive Growth History

TCI’s revenues grew at a CAGR of 96.9% over the past three years and a CAGR of 32.5% over the past five years. Over the past three years, the company’s net income and EPS grew at 44.6% and 45.1% CAGRs, respectively. Its total assets increased at a 10.1% CAGR over the same period.

Robust Profitability

TCI’s trailing-12-month asset turnover ratio of 0.52% is 303.5% higher than the industry average of 0.13%. Its trailing-12-month EBIT margin and net income margin of 90.92% and 79.25% are 288.2% and 366.1% higher than the industry averages of 23.42% and 17%, respectively.

Its trailing-12-month ROTA, ROTC, and ROCE of 34.40%, 31.79%, and 71.50% are significantly higher than the respective industry averages of 2.34%, 2.23%, and 4.99%.

POWR Ratings Reflect Promising Prospects

TCI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. TCI has a B grade for Growth, consistent with its solid growth record. The stock has a Stability grade of B, in sync with the five-year beta of 0.54.

In the 48-stock REITs – Diversified industry, it is ranked #3.

Click here to see the additional POWR Ratings for TCI (Value, Momentum, Sentiment, and Quality).

View all the top stocks in the REITs – Diversified industry here.

Bottom Line

The slowing pace of interest rate hikes is expected to benefit the real estate investment industry, which could be prospectively beneficial for TCI. On top of it, the company has a solid growth history and impressive profitability. Therefore, this stock might be a solid addition to your watchlist now.

How Does Transcontinental Realty Investors, Inc. (TCI) Stack up Against Its Peers?

While TCI has an overall POWR Rating of B, one might consider looking at its industry peers, Alliance Global Group, Inc. (ALGGY - Get Rating) and One Liberty Properties, Inc. (OLP - Get Rating), which also have an overall B (Buy) rating.

TCI shares were trading at $45.03 per share on Friday afternoon, up $0.21 (+0.47%). Year-to-date, TCI has gained 1.92%, versus a 1.21% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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