This Residential Real Estate Stock Is a Good Value

How much upside can you expect from investing in Tricon Capital Group Inc. (TSX:TCN) today?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Tricon Capital Group Inc. (TSX:TCN) is focused on selective U.S. markets in the residential real estate space, which is a good addition to a diversified portfolio. The company has been generating good returns on assets (ROA) and returns on equity (ROE) of at least 5.7% and 8.4%, respectively, every year since 2013.

Its trailing 12-month ROA and ROE are 11.7% and 18.5%, which are higher than the five-year averages. So, it may be a good time to consider Tricon Capital Group today. Here’s an overview of the business.

apartment

The business

Tricon Capital Group was founded in 1988, and it started trading on the Toronto Stock Exchange in 2010. The company is a principal investor and asset manager focused on the residential real estate industry in North America.

Tricon Capital Group has about $6.1 billion of assets under management with about 91% of its assets in the United States across 10 states and the rest in Canada.

The company is involved in land development and home-building or master-planned communities (29% of assets under management), single-family rentals (60%), multi-family rentals (8%), as well as manufactured housing communities (3%).

About 75% of its assets under management are the company’s principal investments and co-investments funded with its balance sheet, which means about 25% of the assets under management are from third-party investors, such as retail investors.

So, by investing in Tricon Capital Group, investors would be essentially investing with the management, whose interests are well aligned with those of the shareholders.

Is Tricon Capital Group a good buy today?

To get good returns, investors should aim to buy good companies when they’re fairly valued or, even better yet, when they’re undervalued. One way to determine if a company is undervalued or not is to look at the consensus estimate and compare it to the current price.

Because most of its assets are in the U.S., Tricon Capital Group reports in U.S. dollars. So, analysts also have their target prices for the company in U.S. dollars.

The Street consensus from Thomson Reuters Corp. has a 12-month target of US$10.20 per share on the stock. Based on the recent foreign exchange of US$1 to about CAD$1.29, the near-term target price in the Canadian currency is about $14. This represents roughly 28% upside potential from Monday’s market close price of $10.93. In other words, there’s a discount of about 22%.

So, Tricon Capital Group is a good value today and has nice upside potential in the next 12 months. It also offers a safe yield of about 2.5% that will add to returns.

Should you invest $1,000 in Tricon Residential right now?

Before you buy stock in Tricon Residential, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Tricon Residential wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has no position in any of the stocks mentioned. Tricon is a recommendation of Stock Advisor Canada.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Dividend Stocks

Income and growth financial chart
Dividend Stocks

The 2 Best TSX Stocks to Buy Before They Recover

These TSX stocks are the perfect pair for TFSA investors, especially if you're looking for growth in 2025.

Read more »

protect, safe, trust
Dividend Stocks

2 Safer, High-Yield Dividend Stocks for Canadian Retirees

Consider Restaurant Brands International (TSX:QSR) and another fast-food stock for a juicy dividend.

Read more »

Canadian Dollars bills
Dividend Stocks

TFSA Investors: Transform Your Money Goals Into Cash-Gushing Monsters With $10,000

The TFSA is the perfect place to produce major income, and this stock could be the perfect pairing.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

TFSA: Your Complete Guide to the $7,000 Contribution Room in 2025

This year you get an extra $7,000 worth of TFSA room. You can use it to hold iShares S&P/TSX 60…

Read more »

how to save money
Dividend Stocks

Could This Undervalued Canadian Stock Be Your Ticket to Millionaire Status?

Here’s why I expect this undervalued Canadian growth stock to stage a strong recovery over the long term.

Read more »

Confused person shrugging
Dividend Stocks

Rogers Stock: Is it Time to Back Up This Telecom Giant?

Rogers stock is one of the most battered telecom stocks out there, but is it a deal in the making?

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

Brookfield Infrastructure Partners: Buy, Sell, or Hold in 2025?

Brookfield Infrastructure Partners is a solid income investment with a history of steady cash distribution growth and long-term capital gains.

Read more »

data analyze research
Dividend Stocks

These Are My Top TSX Stocks to Buy for 2025

Don't let your TFSA collect dust. Invest in these stable TSX stocks and make bank again and again.

Read more »