Index removals put CBL & Associates Properties in focus

CBL & Associates Properties (CBL) has been removed from several Russell value indices, a mechanical shift that can prompt index-tracking funds to adjust positions and often brings the stock onto active investors' watchlists.

Despite the index removals, CBL & Associates Properties has seen firm momentum recently, with a 7 day share price return of 5.99% and a 90 day share price return of 34.81%. The 1 year total shareholder return of 117.44% and 3 year total shareholder return of 190.33% point to a very strong longer term outcome. The recent land sale at CoolSprings Galleria also shows that CBL & Associates Properties is still actively recycling capital within its retail portfolio, which can influence how investors weigh growth potential against risk.

If this kind of price action has your attention, it can be useful to see what else is moving and broaden your watchlist through 20 top founder-led companies

With CBL & Associates Properties now removed from several Russell value indices, a recent share price of $53.09 and a small discount to a $57.50 analyst target, investors have to ask: is this stock undervalued or already pricing in future growth?

Price-to-Earnings of 9.6x: Is it justified for CBL & Associates Properties?

On a P/E of 9.6x at a last close of $53.09, CBL & Associates Properties screens cheaper than many peers, yet sits slightly above its estimated fair P/E of 9.5x.

The P/E multiple compares the company’s share price to its earnings per share and is a common way investors gauge how much they are paying for current profits. For a retail REIT like CBL & Associates Properties, it is often used as a quick check on how the market is weighing today’s earnings against expectations for future profit, even when those earnings have been helped by one off items.

CBL & Associates Properties currently trades at a P/E of 9.6x, which is below the wider US market at 19x. At the same time, it is almost in line with the estimated fair P/E of 9.5x, a level the market could move towards if sentiment normalises around its earnings profile and one off gains.

Compared with the US Retail REITs industry average of 27x and a peer average of 36.6x, CBL & Associates Properties’ 9.6x multiple looks materially lower, suggesting the stock is priced at a discount to many sector peers despite its recent profitability and strong past earnings growth.

Result: Price-to-Earnings of 9.6x (ABOUT RIGHT)

However, CBL & Associates Properties still faces risks, including pressure on retail tenants and a reported annual net income decline of 86.93%, which could challenge confidence in the current valuation.

Another view on CBL & Associates Properties: DCF sends a different signal

While the current 9.6x P/E for CBL & Associates Properties looks reasonable against its fair ratio and sector comparisons, the SWS DCF model tells a different story. With the stock at $53.09 versus an estimated future cash flow value of $41.70, the model suggests the shares are overvalued and raises the question of which signal you trust more.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out CBL & Associates Properties 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 43 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

Mixed signals around CBL & Associates Properties can feel confusing, so it pays to move quickly, review the numbers yourself and weigh both sides of the story. To see how potential upsides stack up against the issues investors are watching, take a closer look at the 2 key rewards and 4 important warning signs

Looking for more investment ideas beyond CBL & Associates Properties?

If CBL & Associates Properties has your attention, it is worth lining up a few more ideas so you are not relying on a single stock or theme.

• Spot potential turnaround stories early by scanning 22 elite penny stocks with strong financials that already show solid financial underpinnings instead of just hype.
• Target quality at a reasonable price by reviewing the 43 high quality undervalued stocks that combine earnings strength with disciplined balance sheets.
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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.