As more and more Americans get Covid-19 vaccinations and lockdowns are being lifted, travel demand has begun to increase. Rates for hotel rooms are rising right along with it as hospitality companies strive to recoup the losses experienced throughout the course of the pandemic.
While nightly rates remain somewhat lower than they were a year ago, travel booking technology company Koddi reported they have steadily increased to match, or even surpass in some popular destinations, pre-pandemic prices over the past month.
Due to these developments, value investors may be looking for good opportunities among stocks that have outperformed the overall market over the past 12 months.
According to the GuruFocus All-in-One Screener, a Premium feature, as of April 28, hotel operators that have outperformed S&P 500 Index by at least 20% over the past year are Hilton Worldwide Holdings Inc. (HLT, Financial), Marriott International Inc. (MAR, Financial) and Extended Stay America Inc. (STAY, Financial).
Hilton Worldwide Holdings
Having gained around 72.91% over the past year, Hilton Worldwide (HLT, Financial), which has a $36.13 billion market cap, was trading around $129.50 per share on Wednesday with a price-sales ratio of 8.41.
The GF Value Line shows the stock is significantly overvalued currently based on historical ratios, past performance and future earnings projections.
The McLean, Virginia-based company, which operates a broad portfolio of hotels and resorts, has a GuruFocus financial strength rating of 2 out of 10. As a result of issuing approximately $3.8 billion in new long-term debt over the past three years, Hilton has poor interest coverage. The Altman Z-Score of 0.91 also warns the company could be in danger of bankruptcy if it does not improve its liquidity.
Hilton's profitability fared better, scoring a 6 out of 10 rating even though its margins and returns are negative and underperform over half of its competitors. The moderate Piotroski F-Score of 4, however, indicates business conditions are stable. The company also has a predictability rank of one out of five stars, which is on watch as a result of operating income loss and declining revenue per share over the past several years. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Hilton Worldwide, Bill Ackman (Trades, Portfolio) has the largest stake with 4.81% of outstanding shares. Other top guru shareholders include Andreas Halvorsen (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Steven Cohen (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
Marriott International
Climbing 75.61% over the past year, shares of Marriott International (MAR, Financial) were trading around $149.35 on Wednesday. The company has a market cap of $48.69 billion, a price-book ratio of 112.78 and a price-sales ratio of 4.62.
According to the GF Value Line, the stock is currently significantly overvalued.
The hotel chain, which is headquartered in Bethesda, Maryland, has a GuruFocus financial strength rating of 3 out of 10. As a result of issuing approximately $2 billion in new long-term debt over the past three years, the company has poor interest coverage. The Altman Z-Score of 2.01 also suggests Marriott is under some pressure financially since its operating income has recorded losses in recent years. In addition, its weighted average cost of capital outweighs its return on invested capital, indicating struggles with creating value.
Marriott's profitability scored a 6 out of 10 rating even though its margins are in decline. It is supported, however, by returns that outperform over half of industry peers as well as a moderate Piotroski F-Score of 5. The one-star predictability rank is on watch as a result of revenue per share declining over the past five years.
With a 0.42% stake, First Pacific Advisors (Trades, Portfolio) is the company's largest guru shareholder. PRIMECAP, Steven Romick (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Pioneer, Larry Robbins (Trades, Portfolio), Simons' firm and Ray Dalio (Trades, Portfolio) also have significant holdings in Marriott.
Extended Stay America
Up 94.71% from a year ago, shares of Extended Stay America (STAY, Financial) were trading around $19.81 on Wednesday with a market cap of $3.52 billion, a price-earnings ratio of 141.4, a price-book ratio of 5.15 and a price-sales ratio of 3.37.
The GF Value Line shows the stock is significantly overvalued currently.
Headquartered in Charlotte, North Carolina, the economy apartment hotel chain has a GuruFocus profitability rank of 3 out of 10. In addition to poor interest coverage, the low Altman Z-Score of 1.16 warns the company could be in danger of going bankrupt if it does not improve its liquidity. The WACC also eclipses the ROIC, indicating struggles with creating value.
The company's profitability fared better with a 7 out of 10 rating, driven by margins and returns that outperform a majority of its competitors as well as a moderate Piotroski F-Score of 5. As a result of revenue per share declining over the past three years, the one-star predictability rank is on watch.
With a 0.61% stake, Simons' firm has the largest position in Extended Stay. Ron Baron (Trades, Portfolio) and Dalio also have positions in the stock.
Disclosure: No positions.
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