Down 28% so far this year, could the Goodman share price be ready to take off?

The Goodman Group (ASX: GMG) share price is rebounding with the market on Wednesday.

In afternoon trade, the integrated industrial property company’s shares are up 3% to $19.14.

However, despite this gain, the Goodman share price remains down 28% since the start of the year.

Is the Goodman share price ready to take off?

According to a recent note out of Goldman Sachs, its analysts believe that now could be the time to pick up shares.

Goldman currently has a buy rating and $25.40 price target on the company’s shares.

Based on the current Goodman share price, this implies potential upside of ~33% for investors over the next 12 months.

Why is Goldman bullish?

In its initiation report, Goldman spoke very positively about Goodman’s outlook. This is due to long term demand for industrial property, its $12.7 billion development pipeline, and its ability to capture market rental growth.

The broker believes this will allow Goodman to deliver asset under management (AUM) growth of 19% through to FY 2024 even as interest rates rise.

Goldman commented:

Our view of GMG is supported by a solid outlook for the Industrial sector more broadly, with a number of favourable fundamentals underpinning future long-term demand for industrial space (e.g., increasing e-commerce penetration and supply chain modernisation).

Given GMG’s preference to own, develop and manage high-quality industrial assets in key infill markets globally, we believe it is well-positioned to capture market rental growth, which when coupled with elevated investment demand for industrial assets will assist in contributing to AUM growth through increasing valuations (against a backdrop of rising rates).

And while the Goodman share price is not conventionally cheap, the broker believes it is trading at an attractive level when factoring in the company’s growth potential.

Its analysts conclude:

Year to date, GMG shares are down ~27%, underperforming the ASX200 by ~22% and the ASX200 REIT index by ~9%. Our EPS estimates sit in line with Visible Alpha consensus in FY22, -0.2% lower in FY23 and -1.1% in FY24. We estimate that GMG currently trades on a P/E to growth ratio of ~1.9x (vs. 5-yr historical average of ~2.7x), noting the current market implied growth rate of ~9% pa, compares to our FY22-24e EPS CAGR of ~13%.

The post Down 28% so far this year, could the Goodman share price be ready to take off? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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