CubeSmart (CUBE) is a real estate investment trust. Typically, I exclude such stocks from my P/E Gap analysis, but not in this case. The company is overvalued plain and simple and should be sold. Yes, there is a dividend here, but not enough to justify the premium in the stock. The company is in the self-storage business – a sector that did particularly well during the financial crisis and extraordinarily high foreclosure rate.
Since bottoming near $1 per share in 2009, the stock has been on a straight shot higher. It started selling off in late October and was picked up by my P/E Gap model at the end of the month. Selling has accelerated in November and I expect even more losses. Chartists will see a head-and-shoulders pattern developing signifying a possible collapse. Analysts expect profits to grow by 11% in 2014. At current prices shares trade for 17 times 2014 estimated earnings. This is a classic P/E Gap story that should be sold.