How to Value Real Estate Companies

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Real estate companies are unique, however, in terms of market valuation they can be a little difficult to understand. One tool you can use to help is the stock market. The stock market is one of the most dynamic markets in the world. There are a number of real estate companies that trade on the stock market. They are called REITs or Real Estate Investment Trusts.


Step 1

Review the definition for a PE (Price to Earnings) ratio. A PE ratio is calculated by dividing the current price of a stock by the earnings for the stock.

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Step 2

Determine the PE ratio for your real estate company. Obtain the price from any stock market quote tool on the net or your broker and the earnings per share from the annual report or the company website under Investor Relations.


Step 3

Compare the PE ratio to the average PE ratio for real estate companies. You can do this on most investment research sites.

Step 4

Determine if your company is under- or overvalued. The company is undervalued if the PE ratio is below the industry average and overvalued if above the industry average.



Step 5

Use the industry average to back into what the value of the real estate company is. Since the PE ratio is price divided by earnings, if you know the average PE ratio you can multiply this by the earnings per share to get the share price. Multiply this by the number of shares outstanding for the market value of the company.