Highwoods Properties (HIW) is being reshuffled across the Russell index family, removed from several large-cap and mid-cap benchmarks and added to the Russell 2000, including its value and defensive variants.
See our latest analysis for Highwoods Properties.
Index reshuffling has coincided with strong momentum in Highwoods Properties, with a 30 day share price return of 14.71% and a 90 day share price return of 48.33%, while the 3 year total shareholder return of 62.77% contrasts with a slightly negative 5 year total shareholder return.
If this index move has you thinking beyond a single office REIT, it could be a good moment to broaden your search with 20 top founder-led companies
After a sharp index-driven run, and with Highwoods Properties now sitting at about an 18% implied discount to one intrinsic value estimate but above the average analyst target, does it make more sense to step in now or wait for a cleaner entry?
Most Popular Narrative: 22% Overvalued
Highwoods Properties closed at $31.98 against a narrative fair value of $26.22, so the current price sits well above that modelled estimate built on relatively cautious earnings assumptions and a higher required return.
The analysts have a consensus price target of $26.22 for Highwoods Properties based on their expectations of its future earnings growth, profit margins and other risk factors.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $23.0.
Want to understand why a company with pressured margins and falling earnings still supports a rich future P/E in this narrative? The answer sits in a tight mix of assumed revenue growth, shrinking profitability and a premium valuation multiple that outstrips the sector. The tension between those inputs is what drives that $26.22 fair value call.
Result: Fair Value of $26.22 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there are also clear swing factors that could challenge the Highwoods Properties narrative. These include the risk that remote and hybrid work keeps vacancy elevated and the possibility that high ongoing capital spending compresses margins more than analysts expect.
Find out about the key risks to this Highwoods Properties narrative.
Another View: DCF Points to Undervaluation
The popular narrative has Highwoods Properties trading 22% above the $26.22 fair value estimate, but the SWS DCF model paints a very different picture. In that framework, HIW at $31.98 sits about 18% below a future cash flow value of $39.21. This raises a clear question over which lens matters more for you.
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 Highwoods 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 41 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 Highwoods Properties can be confusing, so if you feel the clock is ticking, take a closer look at the full picture and weigh the 2 key rewards and 4 important warning signs.
Looking for more investment ideas beyond Highwoods Properties?
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- Target value and quality by scanning companies that combine reasonable pricing with fundamentals using the 41 high quality undervalued stocks.
- Prioritise resilience by reviewing companies that score well on stability with the 74 resilient stocks with low risk scores.
- Hunt for potential future standouts before the crowd pays attention through the screener containing 18 high quality undiscovered gems.
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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