Is CBRE (CBRE) an Overvalued Stock?

By Kim Brooks • Friday, January 10 15:14 • Permanent Link

Falling -5.3% today, shares of CBRE are giving us reason to question their average rating of buy. Did analysts get things wrong about this stock? Let's dive into the numbers to see whether CBRE is overvalued at today's price of $122.95 per share.

CBRE has a P/E ratio of 39.8 based on its 12 month trailing earnings per share of $3.09. Considering its future earnings estimates of $6.0 per share, the stock's forward P/E ratio is 20.5. In comparison, the average P/E ratio of the Finance sector is 20.04 and the average P/E ratio of the S&P 500 is 29.3.

We can also compare the ratio of CBRE's market price to its book value, which gives us the price to book, or P/B ratio. A company's book value refers to its present equity value -- or what is left over when we subtract its liabilities from its assets. CBRE has a P/B ratio of 4.25, with any figure close to or below one indicating a potentially undervalued company.

A comparison of the share price versus company earnings and book value should be balanced by an analysis of the company's ability to pay its liabilities. One popular metric is the Quick Ratio, or Acid Test, which is the company's current assets minus its inventory and prepaid expenses divided by its current liabilities. CBRE's quick ratio is 0.889. Generally speaking, a quick ratio above 1 signifies that the company is able to meet its liabilities.

Next up in our analysis is CBRE's levered free cash flow, which stands at $175.0 Million. This represents the cash that is available to the company after all of its expenses and income are accounted for -- including those that arise outside of its core business activities. This money can be used to re-invest in the business or to payout a dividend. For now, at least, CBRE has chosen the former.

At Market Inference, we will keep monitoring CBRE to see if the analysts were right to recommend the stock despite its valuation issues. We recognize that numbers don't always tell the whole story, and that qualitative factors often set high performing investments apart from the rest.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.