Should You Think About Buying Choice Hotels International, Inc. (NYSE:CHH) Now?
While Choice Hotels International, Inc. (NYSE:CHH) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$130 at one point, and dropping to the lows of US$104. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Choice Hotels International's current trading price of US$112 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Choice Hotels International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
View our latest analysis for Choice Hotels International
What Is Choice Hotels International Worth?
Choice Hotels International appears to be overvalued by 39% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$112 on the market compared to my intrinsic value of $80.83. This means that the opportunity to buy Choice Hotels International at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Choice Hotels International’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of Choice Hotels International look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 18% over the next couple of years, the outlook is positive for Choice Hotels International. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in CHH’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe CHH should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on CHH for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the optimistic prospect is encouraging for CHH, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
If you want to dive deeper into Choice Hotels International, you'd also look into what risks it is currently facing. At Simply Wall St, we found 2 warning signs for Choice Hotels International and we think they deserve your attention.
If you are no longer interested in Choice Hotels International, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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