The commercial real estate (CRE) market has certainly suffered a brutal run the past year and a half after the onset of the COVID-19 pandemic. Some may think that would put CBRE Group (NYSE: CBRE) -- one of the largest CRE data, analytics, and service companies -- in a challenging position, but the company didn't just survive the downturn. They thrived.
Share prices over the past year have reached record highs and drawn the attention of investors looking to capitalize on opportunities in the commercial data and software industry. If you're considering investing in CBRE Group, here's a closer look at this real estate stock, as well as insights into whether CBRE is a buy right now.
Diversified services within the CRE market
CBRE Group operates globally, providing advisory, data, and analytics services; mortgage origination and servicing; and leasing and property sales for clients in 100+ countries. Over the past decade, CBRE Group has focused on adding a range of new services to its portfolio to strengthen and grow revenues while minimizing risk exposure through diversification. And its efforts have paid off.
As of the second quarter of 2021, the company had generated $6.45 billion in revenues -- a 13% increase from pre-pandemic operations in Q2 of 2019 and a 20% year-over-year increase. Adjusted earnings per share increased 68% from pre-pandemic levels and 291% compared to the same quarter a year prior.
The company's advisory services are leading revenues, as investors look to their annual and quarterly reports on CRE sectors and markets to provide insights into the recovery and impacts felt by the industry during the pandemic.
Capital markets, including leasing and sales activity, are second in line in terms of revenues and show strong signs of recovery. Global sales revenue was 27% above the Q2 2019 level, although leasing levels are still 18% below Q2 2019 levels.
Pandemic-propelled, will CBRE keep growing?
The pandemic clearly propelled the company forward in many ways, particularly with its advisory services being in high demand. But the company is also making moves for continued growth beyond pandemic circumstances.
In July of 2021, CBRE Group announced its plans to acquire majority interest (60%) in Turner & Townsend, a global real estate management and advisory firm, for an approximate cost of $1.3 billion. The acquisition, which is set to close by year-end 2021, should bring a new revenue stream to the company through project and facilities management valued at over $6 billion.
So, is CBRE Group a buy?
The company's stellar performance over the past year shows there is major resilience in the marketplace, particularly for the services CBRE offers. And investors have taken note. The company's share prices are sitting 53% above the pre-pandemic highs of February 2019.
Its earnings-per-share, a common metric used to help understand a share price as it relates to value and performance, is 22x, meaning the company is relatively priced for its performance over the past four quarters.
Considering the company's growth prospects, current performance -- given the state of the commercial market -- and diversified revenue sources, I personally think CBRE Group is a buy right now. However, it is important to note that CBRE Group's debt ratios would greatly benefit from improvement. As of Q2 2021, the company's net leverage ratio was -0.07x, indicating the company could be overleveraged.
However, when estimating pro forma performance after the acquisition of Turner & Townsend, the company estimates the net leverage ratio to improve significantly to a positive 0.2x. More risk-averse investors may want to wait to see how the acquisition goes before investing, but if it plays out as hoped, share prices could be much higher at that time.