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Introduction

CBRE Group (CBRE) has seen a rather significant price decline this year, with the stock dropping by over 30%. But the business is doing better than ever. The top line has been growing and is higher than 2019 levels now, with the bottom line following suit. Together this makes for a stable and strong business that is selling at a discount.

Last Fiscal Year

In 2021, CBRE saw another good year of growth, attributable to the rebound in the economy since the pandemic. Total revenue grew by 16.5%, with net revenue growing 23.4% and pass-through revenue staying flat. This is a really solid top-line gain. Looking into the segments, Global Workplace Solutions saw 8.2% growth, Advisory Services grew 32.7%, and Real Estate Investments increased by 31.3%. Global Workplace Solutions and Advisory Services both grew from continued rebounding in facilities management and lease/sales revenues after the pandemic. Real Estate Investments grew due to growth in assets under management.

Looking down the P&L, operating & net income saw nice growth too. Each grew by 68.7% and 144%, which is 129% and 143% of 2019 levels, respectively. The EPS for the year was reported at $5.41. Overall, CBRE had a great year with a continued rebound in the industry after COVID. The company is now posting numbers over 2019 levels showing the business has gained ground since the pandemic.

This Year

Looking at the midyear of 2022 results, CBRE is continuing the prior trends. Total revenue so far this year is up 21.8%, with net revenue growing 26.2% and pass-through revenue up 15.6%. Global Workplace Solutions saw growth of 19.8%, Advisory Service grew by 25.8%, and Real Estate Investments increased by 23.9% from last year. Again most of the growth is due to stronger demand after the pandemic, with a boost in Global Workplace Solutions from the acquisition of Turner & Townsend. In the Advisory Services, segment sales increased 33%, and leasing grew 43.6%, showing this a strong industry demand. All aspects of the Advisory Services segment (servicing, valuation, management, leasing, sales) have grown this year so far too showing the breadth of industry demand currently.

Operating and net income have continued to grow too. Operating income has seen a 40.6% gain, while net income has grown by 24.4%. The result is an EPS of $2.64 and a full-year estimate of $6.19.

Balance Sheet

To pair with this growth, CBRE also has a pristine balance sheet, with flush liquidity and a low debt load. As of the most recent quarter, the company has a current ratio of 1.16x and a debt-to-equity ratio of 1.30x. Altogether, the operational performance and scale paired with this balance sheet, make CBRE a very stable business.

Valuation

As of writing, CBRE trades around the $70 price level. At this level, the company trades at a trailing P/E of 12.93x and a forward P/E of 11.31x. CBRE has a book value per share of $26.98 and also trades at a P/BV of 2.59x. Taking all this information together, it seems CBRE is slightly undervalued.

Conclusion

CBRE has seen a full rebound since pandemic levels and some. Revenue has increased by double digits in the past two years, and net income has shown the same trend. Overall, CBRE is still a very strong and stable business, and its value has increased as the price of the stock has declined over 30% year to date.

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