Unveiling Host Hotels & Resorts (HST)'s Value: Is It Really Priced Right? A Comprehensive Guide
Host Hotels & Resorts Inc (NASDAQ:HST) recently recorded a daily gain of 1.81%, despite a 3-month loss of -6.02%. The company's Earnings Per Share (EPS) stands at 1.05. This raises an important question: Is the stock significantly undervalued? This article aims to provide a comprehensive valuation analysis of Host Hotels & Resorts, shedding light on its intrinsic value. So, let's dive in.
Company Overview
Host Hotels & Resorts Inc, with an impressive portfolio of 77 predominantly urban and resort upper-upscale and luxury hotel properties, represents nearly 42,000 rooms, primarily in the United States. The company's stock is currently priced at $16.56, with a market cap of $11.80 billion. However, according to GuruFocus's GF Value, the fair value stands at $27.5, indicating the stock may be significantly undervalued. Let's further analyze this by looking into the company's financial performance.
Understanding GF Value
The GF Value represents an exclusive method of determining a stock's intrinsic value. It is based on historical trading multiples, a GuruFocus adjustment factor derived from the company's past performance and growth, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. On the contrary, if it is significantly below the GF Value Line, its future return will likely be higher.
Based on this method, Host Hotels & Resorts (NASDAQ:HST) appears to be significantly undervalued. At its current price of $16.56 per share, the stock is estimated to be trading below its fair value. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Assessing the financial strength of a company before investing is crucial to avoid the risk of permanent loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Host Hotels & Resorts boasts a cash-to-debt ratio of 0.17, outperforming 74.37% of 718 companies in the REITs industry. The company's overall financial strength is rated 5 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies carries less risk, especially those demonstrating consistent profitability over the long term. Host Hotels & Resorts has been profitable 8 years over the past 10 years. However, its operating margin of 15.56% is worse than 85.71% of 665 companies in the REITs industry. Moreover, Host Hotels & Resorts's 3-year average revenue growth rate is worse than 67.82% of 634 companies in the REITs industry, and its 3-year average EBITDA growth rate is -6.6%, ranking worse than 68.47% of 536 companies in the REITs industry.
Another crucial profitability indicator is the comparison of a company's return on invested capital (ROIC) to its weighted cost of capital (WACC). If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Host Hotels & Resorts's ROIC was 6.8, while its WACC came in at 9.49.
Conclusion
In conclusion, the stock of Host Hotels & Resorts (NASDAQ:HST) is estimated to be significantly undervalued. The company's financial condition and profitability are fair, but its growth ranks worse than 68.47% of 536 companies in the REITs industry. For a more detailed financial analysis of Host Hotels & Resorts, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
