Is Alset EHome International a Buy Under $1? Shares of Alset EHome International (AEI) have surged nearly 136% in price over the past month despite home prices surging beyond the affordability of many buyers. So, can the stock...
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Shares of Alset EHome International (AEI) have surged nearly 136% in price over the past month despite home prices surging beyond the affordability of many buyers. So, can the stock maintain its momentum despite the company's lack of profitability in the last quarter? Let's discuss.
Alset EHome International Inc. (AEI), through its subsidiaries, does business in property development, digital transformation technologies, and bio health operations. The Bethesda, Md., company is engaged in land development, home building, sales and rental, and property management.
The company's shares have surged 136% in price over the past month due to several operational advancements the company has undertaken.
However, the stock has declined 93.9% over the past year and 72.3% over the past six months to close yesterday's trading session at $0.66. In addition, the stock hit its 52-week low of $0.25 on February 24, 2022.
Here is what could shape AEI's performance in the near term:
Industry Headwinds
Due to insufficient inventory to satisfy robust demand, worldwide housing prices have skyrocketed. Companies like AEI are projected to suffer since prices have risen beyond the affordability of many buyers. In addition, the Fed's interest rate increase this week to control the surging inflation could impact the mortgage rates. Mortgage rates are expected to climb since they move in unison with the federal funds rate. And mortgage rates may continue to rise throughout the year on projected interest rate hikes, which should negatively affect the buying power of consumers.
Poor Bottom-line Performance
AEI's total revenue increased 123.2% year-over-year to $4.79 million for the three months ended Sept. 30, 2021. Its operating income came in at $51,580over this period.
However, its net loss came in at $7.11 million, while its loss per share amounted to $0.19 over this period. In addition, its net cash used in operating activities was $6.49 million, representing a 481.5% increase for the nine months ended Sept. 30, 2021.
Poor Profitability
AEI's 42.4% trailing-12-months gross profit margin is 37.3% lower than the 67.5% industry average. Its trailing-12-months cash from operations stood at negative $3.73 million compared to the $220.35 million industry average. Also, its trailing-12-months ROA, net income margin, and ROC are negative 41.9%, 282%, and 1.8%, respectively.
POWR Ratings Reflect Uncertainty
AEI has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. AEI has an F grade for Quality. The company's poor profitability and financials are consistent with the Quality grade.
Among the 45 stocks in the D-rated Real Estate Services industry, AEI is ranked #35.
Beyond what I have stated above, one can view AEI ratings for Stability, Momentum, Growth, Value, and Sentiment here.
Bottom Line
While the company's recent announcements about cryptocurrency and metaverse garnered significant investor attention and caused the stock to skyrocket in price, increasing interest rates and surging house prices may affect its long-term prospects. In addition, given its lack of profitability and negative profit margins, we believe the stock is best avoided now.
How Does Alset EHome International Inc. (AEI) Stack Up Against its Peers?
While AEI has an overall D rating, one might want to consider its industry peers, Marcus & Millichap Inc. (MMI) and Jones Lang LaSalle Incorporated (JLL), which have an overall A (Strong Buy) rating.
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AEI shares were trading at $0.60 per share on Thursday morning, down $0.07 (-9.86%). Year-to-date, AEI has gained 7.53%, versus a -5.74% 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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