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Aggressive Growth

HFF Inc (HF - Snapshot Report) is seeing analysts continue to push the next quarters' earnings estimates higher, and that helps make the stock a Zacks #1 Rank (Strong Buy).

Company Description

HFF, Inc. provides commercial real estate and capital markets services to the commercial real estate industry.

Good Earnings Streak

HF is on a three quarter winning streak as far as positive earnings surprises are concerned. Beats of $0.04, $0.21 and $0.07 respectively, served to bolster investor confidence following two negative surprises.

In the most recent quarter, the company reported earnings of $0.29 per share, topping the Zacks Consensus Earnings Estimate of $0.22 by $0.07. The December 2010 quarter resulted in a negative earnings surprise, a miss of $0.05. This makes the year ago comparison a favorable one for the company.

Good news in the most recent quarter includes three deals from around the country that closed. A $116.5M deal construction loan closed in Arlington VA, and $90 million for a multi housing high rise in Chicago IL, hit midway through the quarter. Earlier in the quarter, the company announced the sale of an office tower in Ft. Lauderdale FL.

Recent Secondary Offering

On August 4, the company announced the pricing of a secondary offering at $13.50 per share. The stock is trading about $2 lower since the pricing, providing an attractive entry point. Cash of $116M as of the end of the third quarter of 2011 is up 90% from the year ago level of $61 million.

Valuations

Shares of HF carry some interesting valuation metrics in comparison to the broader industry. HF trades at a discounted forward PE of 9.7x compared to 14x average for the industry. Its price to book, however, is at 3.2X compared to 2.1x for the industry. The higher multiple for the conservative measure of P/B is an indication that HF has stronger fundamentals than other companies in its industry.

The recent strong pending home sales data does not hold a direct correlation to the commercial real estate business, but an improvement in one is likely to be a good sign for the other. This recent data point is another indication that things are looking up for HF.

The Chart

HF holds a Zacks #1 Rank (Strong Buy), in part, due to consistent earnings increases from analysts. The price and consensus chart below shows that expectations continue to rise while the stock has not budged from its recent range. At some point, the earnings growth will be recognized by growth investors, many of whom are willing to pay for steady growth.

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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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