Is Chatham Lodging Trust (NYSE:CLDT) Potentially Undervalued?
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Chatham Lodging Trust (NYSE:CLDT), which is in the reits business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Chatham Lodging Trust’s outlook and valuation to see if the opportunity still exists.
See our latest analysis for Chatham Lodging Trust
Is Chatham Lodging Trust still cheap?
Great news for investors – Chatham Lodging Trust is still trading at a fairly cheap price. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 26.15x is currently well-below the industry average of 33.17x, meaning that it is trading at a cheaper price relative to its peers. What’s more interesting is that, Chatham Lodging Trust’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Chatham Lodging Trust look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -1.4% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Chatham Lodging Trust. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although CLDT is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to CLDT, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on CLDT for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Chatham Lodging Trust. You can find everything you need to know about Chatham Lodging Trust in the latest infographic research report. If you are no longer interested in Chatham Lodging Trust, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
