Jones Lang Lasalle a Cheap Rental

The might be too low a price. Chicago-based Jones doesn't own lots of pricey real estate like investment trusts do. In fact, relative to the money it makes, the company owns little of anything. It's mostly an advisory and service firm with offices in 50 countries. Jones gets paid to manage properties, represent corporate renters, represent property owners and manage real estate investment funds. Its business is poised to slow, but perhaps not as much as the stock price suggests.

Wall Street reckons the company generated sales of $2.6 billion in 2007, a 29% increase. This year sales are seen climbing 5%. The company's business is spread fairly evenly around the world, so that a pickup in one market helps offset a slowdown in another. Management reports, for example, that corporate rents have bottomed in Detroit, are accelerating in Mexico City, growing at a slowing pace in London and shrinking in Beijing.

Jones also has a hand in businesses that do well in a slow economy. For example, companies will buy fewer offices in a slowdown, reducing revenue for the sales division at Jones. But they might also trim costs and lighten balance sheets by outsourcing real estate management, giving a boost to the corporate services unit. That's not to say Jones will flourish through a slowdown. Some of its most lucrative markets are tied closely to the financial sector, which is struggling. Analysts figure that 40% of leasing revenue in New York City and 30% in London was related to financials in the first half of 2007.

Even with the projected sales increase, profits for Jones are seen dipping 12 cents a share to $7.13 in 2008. But that number puts the stock at just nine times forward earnings, a discount of about 40% to the broad market. Perhaps earnings forecasts are too ambitious, but in its past four quarters Jones has beaten them four times by an average of 13%. The company owes little; debt makes up just 11% of capital. It also generates a decent amount of cash. During the first three quarters of 2007 the company cleared $153 million in cash from operations and spent $66 million to retire shares — five times what it spent on dividends.

The swooning share price puts the stock's dividend yield at a nearly respectable 1.5%. That, along with the modest valuation, earned the company a spot recently on our Not Just Income screen. It looks for companies with at least so-so dividends, but also with plenty of potential for share price gains. Eight companies recently made the cut. Run the search anytime using SmartMoney's stock screener and the full recipe of search criteria.