Office Properties Income Trust (OPI) is a real estate investment trust that owns, operates, and leases buildings mostly to single tenants and those with high credit quality characteristics, such as government institutions. OPI is managed by the operating subsidiary of The RMR Group Inc. (RMR), an alternative asset management firm based in Newton, Massachusetts.
OPI's first-quarter results showed that the company's overall performance remained favorable. It executed 572,000 square feet of new and renewal leasing with a 5.1% weighted average rent roll-up and a lease term of more than ten years. It completed almost one million square feet of fresh leasing over the last four quarters, concluding the first quarter with same-property occupancy of more than 91%.
The stock has gained 1.6% over the past month to close its last trading session at $19.67.
Here's what could shape OPI's performance in the near term:
Impressive Growth Prospects
Street expects OPI's EPS to rise 89.1% in the current quarter ending June 2022. In addition, OPI's EPS is expected to rise at a 5% CAGR over the next five years. Moreover, the company’s revenue is expected to increase marginally year-over-year to $570.98 million next year.
Discounted Valuation
In terms of trailing-12-month Price/Cash Flow, the stock is currently trading at 4.45x, 69.7% lower than the industry average of 14.68x. Also, its trailing-12-month Price/Sales of 1.64x is 70.5% lower than the industry average of 5.55x. Moreover, OPI's trailing-12-month Price/Book of 0.65x is 61.2% lower than the industry average of 1.68x.
Consensus Rating and Price Target Indicate Potential Upside
Of the two Wall Street analysts that rated the stock, one rated it a Buy. The 12-month median price target of $27 indicates a 37.3% potential upside. The price targets range from a low of $16.00 to a high of $38.00.
POWR Ratings Reflect Solid Prospects
OPI has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. OPI has an A grade for Growth. OPI's solid earnings and revenue growth potential is consistent with the Growth grade.
Of the 50 stocks in the C-rated REITs – Diversified industry, OPI is ranked #9.
Beyond what I stated above, we have graded OPI for Stability, Value, Quality, Sentiment, and Momentum. Get all OPI ratings here.
Bottom Line
OPI exhibited robust financial performance in its first-quarter earnings report. Furthermore, its stock could witness a significant upside based on its recent and upcoming projects. In addition, given the favorable analysts' price targets and its fundamental strength, OPI could witness a solid upside in the coming weeks. So, we think the stock could be a great buy now.
How Does Office Properties Income Trust (OPI) Stack Up Against its Peers?
OPI has an overall POWR Rating of B, which equates to a Buy rating. Check out these other stocks within the same industry with A (Strong Buy) or B (Buy) ratings: Alliance Global Group Inc. (ALGGY), Land Securities Group PLC (LDSCY), Lamar Advertising Co. (LAMR).
OPI shares were unchanged in premarket trading Monday. Year-to-date, OPI has declined -14.99%, versus a -15.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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