CARETRUST REIT INC (NYSE:CTRE) – A Top Pick for Affordable Growth Investors

Investors looking for growth opportunities at fair prices often consider the "Affordable Growth" strategy, which finds stocks with good growth potential, steady profitability, and strong financials, all while steering clear of overvalued options. This method balances the search for fast-growing companies with careful valuation checks, lowering the chance of paying too much for future earnings. One stock that meets these standards is CARETRUST REIT INC (NYSE:CTRE), a healthcare real estate investment trust focused on skilled nursing and senior housing properties.

Growth at a Fair Price

The Affordable Growth screen looks for stocks with a Growth rating above 7, confirming they show strong historical and expected growth. CTRE performs well here with a Growth rating of 9, backed by:

• Past Growth: Revenue jumped 50.83% over the last year, while earnings per share (EPS) rose 108.47%. Over several years, revenue and EPS have grown at 12.64% and 11.30%, respectively.
• Future Expectations: Analysts predict 23.02% annual EPS growth and 26.62% revenue growth in the coming years, pointing to faster progress.

This strong growth record sets CTRE apart in the Diversified REITs industry, where many competitors fail to achieve double-digit growth.

Valuation: Paying Fairly for Growth

While fast-growing stocks often come with high prices, the Affordable Growth strategy requires a Valuation rating above 5 to avoid overpriced picks. CTRE’s Valuation rating of 5 shows a balanced view:

• P/E Ratio: At 27.56, CTRE’s trailing P/E is slightly higher than the S&P 500 average (26.84) but lower than 68.99% of its industry peers.
• Forward P/E: The forward P/E of 22.53 is more appealing, below 86.05% of competitors and the S&P 500’s 35.29.
• PEG Ratio: A low PEG ratio—accounting for expected earnings growth—suggests the stock is fairly priced relative to its growth path.

These numbers show that while CTRE isn’t the cheapest, its price aligns with its growth outlook, fitting the Affordable Growth approach.

Key Fundamentals: Profitability and Financial Strength

Affordable Growth stocks must also show solid profitability and financial stability to ensure long-term success. CTRE scores well in these areas:

• Profitability (Rating: 8): The REIT has top-tier margins, including a 98.44% gross margin and 66.50% operating margin, beating 99.22% of peers. Its return on invested capital (ROIC) of 4.38% also ranks in the top group.
• Financial Health (Rating: 5): While the health score is average, CTRE keeps a strong balance sheet with a Debt/Equity ratio of 0.35, better than 96.12% of rivals. The Altman-Z score of 3.48 indicates low bankruptcy risk.

Why These Factors Matter

The Affordable Growth strategy favors companies like CTRE because:

1. Growth drives future earnings potential.
2. Fair valuation reduces downside risk.
3. Profitability and stability ensure the business can maintain growth without relying too much on debt or inefficiencies.

For a closer look at CTRE’s fundamentals, see the full analysis here.

Discovering More Affordable Growth Stocks

CTRE is just one example of a stock that fits this strategy. Investors can find other options using the Affordable Growth screen, which filters for similar growth and valuation traits.

Disclaimer: This article is not investment advice. Do your own research or consult a financial advisor before making investment decisions.