If you spot an S&P/ASX 200 Index (ASX: XJO) stock that's grown 114% over the past five years and experts still reckon it's on an upward curve, then you just have to get a piece of that action, right?
That's precisely the situation we have after public comments from Fairmont Equities managing director Michael Gable.
Let's break it down:
How has Goodman been going?
The last couple of years have not been easy for any ASX 200 shares related to the real estate industry.
The Reserve Bank of Australia was on a mission to quell rampant inflation, so hiked interest rates 12 times over just 14 months.
For industrial property manager Goodman Group (ASX: GMG), its share price plunged more than 40% over the first nine months of 2022.
However, investors have started to trickle back this year, especially the last few weeks.
"After a challenging 12-month period, Goodman Group shares rose sharply following the release of financial results for the 12 months to 30 June 2023 (FY23)," Gable said on the Fairmont blog.
He noted the company's development division, which acquires land and contracts third parties to build industrial buildings on them, is booming.
"The development division has become the main driver of group earnings in recent years, growing its contribution to total earnings from 35% in FY19 to 56% [in] FY23.
"Previously, earnings from the management division accounted for most group earnings in FY20 (38%). This portion has declined to 21% as at FY23."
How will Goodman go in the future?
A tailwind heading into the future will be that rental revenue will remain strong for Goodman.
"There is upside to already elevated NOI [net operating income] levels in FY24 from the reversion of passing rents to market rents (Passing rents are rents paid at any point in time)," said Gable.
"The upside to market rents has sharply improved over the last 12 months, indicating that market rents continue to grow."
The potential boost to income across different regions is mouth-watering: North America +66%, Australia and NZ +37%, continental Europe and UK +17%, and Asia +1%.
Goodman Group also enjoyed the advantage of "low gearing and adequate liquidity".
"The liquidity position will be supported by ongoing retention of capital. This is evidenced on the full-year dividend being maintained. The retained capital is likely to be used in the development pipeline."
But the best thing about Goodman shares is that, despite the sharp climb this year, it's still looking cheap.
According to Gable, the stock is "likely to continue trending higher" over the long term.
"The shares are currently trading on a 1-year forward P/E multiple of 22x. This is not demanding in the context of an EPS growth profile of +9% over FY23-26 on a CAGR basis," he said.
"In addition, there is also upside risk to the latter figure."
