Assessing Lineage (LINE) Valuation As Analyst Downgrades Reset Market Expectations

Recent analyst downgrades of Lineage (LINE), including a shift by Barclays to a more neutral stance, have put the stock in focus as investors reassess expectations around the company’s outlook and upcoming catalysts.

See our latest analysis for Lineage.

At a last close of US$36.34, Lineage’s recent share price return has been mixed, with a 4.43% 1 month gain, a 90 day share price return of 8.81%, and a 1 year total shareholder return loss of 34.36%. This suggests momentum has been fading as analyst downgrades and the upcoming earnings release reshape expectations.

If this kind of reset in expectations has you reassessing opportunities, it could be a good moment to widen your search with fast growing stocks with high insider ownership.

So with analyst sentiment cooling, a share price well below recent highs and a modelled intrinsic value gap of roughly 35%, is Lineage quietly sitting at a discount, or is the market already factoring in any future growth?

Price-to-Sales of 1.5x: Is it justified?

At a P/S of 1.5x, Lineage is priced far below many Industrial REIT peers, even as the share price sits at US$36.34.

The P/S ratio compares the company’s market value to its revenue, which can be a useful yardstick for businesses that are currently loss making. For Lineage, this frames how the market is weighing its sizeable US$5,358.0m revenue base against an annual net loss of US$179.0m and expectations that it remains unprofitable over the next three years.

Despite forecasts for revenue to grow at 4.6% per year, which is slower than both the wider US market and the Industrial REITs industry, the current P/S of 1.5x sits at a steep discount. It is well below both the global Industrial REITs average of 8.9x and the peer average of 10.9x, and also below the estimated fair P/S of 2.3x that our model suggests the market could converge toward if assumptions hold.

Explore the SWS fair ratio for Lineage

Result: Price-to-Sales of 1.5x (UNDERVALUED)

However, there are still clear pressure points, including ongoing net losses of US$179.0m and the risk that slower 4.6% annual revenue growth could limit any rerating.

Find out about the key risks to this Lineage narrative.

Another take from the SWS DCF model

While the 1.5x P/S points to a discount, our DCF model goes further, with an estimated fair value of US$55.65 per share versus the current US$36.34. That implies Lineage is trading at roughly a 35% discount. Is this a genuine mispricing or a warning about execution and profitability risk?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Lineage 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 863 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Lineage Narrative

If you see the numbers differently or prefer to test your own assumptions directly, you can build a personalised view of Lineage in just a few minutes with Do it your way.

A great starting point for your Lineage research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Ready for more ideas beyond Lineage?

If Lineage has you thinking differently about value, do not stop here. Use the Simply Wall Street Screener to spot other opportunities before everyone else catches on.

• Target income focused ideas by checking out these 12 dividend stocks with yields > 3% that could contribute steadier cash flows to your portfolio.
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• Position yourself for long term growth themes by reviewing these 863 undervalued stocks based on cash flows that the market may be pricing conservatively today.

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.

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