DiamondRock Hospitality Company (NYSE:DRH), which is in the reits business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of US$11.35 and falling to the lows of US$9.82. 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 DiamondRock Hospitality's current trading price of US$9.96 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at DiamondRock Hospitality’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is DiamondRock Hospitality still cheap?
Great news for investors – DiamondRock Hospitality is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $17.94, but it is currently trading at US$9.96 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because DiamondRock Hospitality’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will DiamondRock Hospitality generate?
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. Though in the case of DiamondRock Hospitality, it is expected to deliver a relatively unexciting earnings growth of 3.6%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since DRH is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on DRH for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DRH. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on DiamondRock Hospitality. You can find everything you need to know about DiamondRock Hospitality in the latest infographic research report. If you are no longer interested in DiamondRock Hospitality, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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