Alexander's (ALX) stock has been moving without a clear single headline catalyst. This often leads investors to focus more on fundamentals such as property mix, recent returns and income trends.

Alexander's share price has eased over the past week but still has a 30 day share price return of 1.02% and a year to date share price return of 12.78%. Its 1 year total shareholder return of 15.95% and 3 year total shareholder return of 74.22% point to stronger gains when dividends are included.

If you are comparing Alexander's with other opportunities in real assets and infrastructure, it may be worth scanning companies in power grid technology and related infrastructure via the 33 power grid technology and infrastructure stocks

With Alexander's trading around $246.83 and analyst targets sitting lower at $190.00, plus an intrinsic value estimate that is also lower, you need to decide: is the stock mispriced or already reflecting its future growth potential?

Price-to-Earnings of 61.3x: Is it justified?

On a P/E of 61.3x, Alexander's trades at a richer valuation than many investors might expect for a Retail REIT, especially with the last close at $246.83 and both analyst targets and intrinsic value estimates sitting lower.

The P/E ratio compares the share price to earnings per share and is a quick way to see how much the market is paying for each dollar of earnings. For a REIT like Alexander's, which is focused on leasing, managing, developing and redeveloping properties in the New York City area, a higher P/E can indicate the market is pricing in relatively strong or resilient earnings, but here the earnings picture is more mixed.

According to the data, ALX has high quality earnings, but profit margins have moved from 18% to 9.7%. Earnings have declined by 19.7% per year over the past 5 years, and there was a 48.1% earnings decline over the past year. At the same time, earnings are only forecast to grow 7.24% per year, which is slower than both the wider US market and the 20% threshold often used for high growth. Set against that backdrop, a 61.3x P/E suggests the stock is pricing in a much richer earnings profile than recent history and current forecasts indicate.

The comparison with peers is also stark. The US Retail REITs industry average P/E sits at 26.2x and the peer group average at 18x, while the estimated fair P/E for ALX is 38.6x. That means the current multiple is more than double the peer average and well above the level regression analysis points to as a potential fair ratio. This is a gap the market could move towards if sentiment or earnings expectations shift.

Result: Price-to-Earnings of 61.3x (OVERVALUED)

However, investors also need to watch for a sharp reset in analyst expectations or a weaker income trend in Alexander's concentrated New York property portfolio.

Another way to look at value

Our DCF model points to a future cash flow value of $175.85 per share, compared with the current $246.83 price and the P/E based view that already looks stretched. If both earnings and cash flow signals lean expensive, how comfortable are you paying up at these levels?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Alexander's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Given this mix of strong past returns and a stretched P/E, it makes sense to look closely at the full picture before deciding your next move, especially as the company shows both risks and rewards that could matter for your thesis, starting with 1 key reward and 3 important warning signs.

Looking for more investment ideas?

If Alexander's feels fully priced, do not stop here. Broaden your watchlist now so you are not relying on a single stock thesis.

• Target stability first by scanning companies with resilient finances and low risk profiles through the 63 resilient stocks with low risk scores.
• Hunt for value opportunities that pair quality fundamentals with attractive pricing using the 46 high quality undervalued stocks.
• Prioritise dependable income potential by reviewing stocks offering stronger yields and balance sheets via the 11 dividend fortresses.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.