The average target price of PGRE is 4.6 and suggests 2% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 5.0. This translates into 10% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 3.3. This is equivalent to 29% downside potential in the worst case. 

Headquartered in New York City, Paramount Group, Inc. is a fully-integrated real estate investment trust that owns, operates, manages, acquires and redevelops high-quality, Class A office properties located in select central business district submarkets of New York City and San Francisco. Paramount is focused on maximizing the value of its portfolio by leveraging the sought-after locations of its assets and its proven property management capabilities to attract and retain high-quality tenants.

Paramount Group, Inc.

Real Estate

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is a clear trend. In the past 12 months, the dividend yield has been low and below its peers. At the same time, the average five-year yield has been significantly higher and exceeded most of its peers. On average, the company pays dividends quarterly. 

PGRE reported revenue of USD 757mn in the last 12 months, up 2% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 82% from FY23 to USD -0.21. Market expects EPS to reach USD -0.02 in FY25.

Over the last six months, the stock performance has varied, with an increase following a drop. The stock's price trend wasn't definitive when matched against its global counterparts from the same sector and industry (as depicted above). Within the past six months, its performance has trailed this peer group's by 8ppts and its growth accelerated by 5ppts in the past month. This is equally valid for peers from the same country and industry. Given the stock's valuation versus its peers, its total price movement is neither favourable nor unfavourable.

The company has reported very strong EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 50.4% in the last 12 months, a decline from 51.5% in FY23. 

Historically, PGRE has reported very poor net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled -8.8%, a growth from -34.1% in FY23. 

Paramount Group, Inc. reported a return on equity (RoE) of -2.1% in the last 12 months, up from -7.5% in FY23. The market consensus projects an RoE of -0.3% in FY24, again behind its peers. 

Another important profitability metric, return on assets (RoA), amounted to -0.8% in the last 12 months, an increase from -3.1% in FY23. The market analysts predict that RoA will be -0.1% in FY24, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to -0.8%, below the peers. The consensus estimate for FY24 for RoCE is 0.1%, again behind the peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been -0.3 in the past several years. This ratio implies a fragile shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

PGRE has above average trading liquidity. The average private investor can sell his common position in the stock almost immediately. Liquidity is usually quite stable and remains favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to slow historical revenue growth, negligible return on capital, excessive margin volatility, poor working capital management, weak debt servicing capacity, and inadequate interest coverage. We note robust profitability and an favourable capital structure, among the positive credit factors. 

In highly turbulent market conditions, PGRE is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, PGRE is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from low to mild. 

Based on key historical and expected multiples, the stock is greatly undervalued relative to its peers. In particular, the stock is 'cheap' on EV/EBITDA, undervalued on P/FC. 

Paramount Group, Inc.

$ 4.55

5

Paramount Group, Inc.

$ 4.55

5

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 4.55

About

About

About

About