Marriott Stock Remains A Good Pick After Recent Rally

by Trefis Team
+7.15%
Upside
83.04
Market
88.98
Trefis
H
Hyatt Hotels
Rate   |   votes   |   Share

The shares of Choice Hotels (NYSE: CHH) have completely recovered to pre-Covid levels, but the shares of Marriott International (NASDAQ: MAR) remain 13% below the pre-crisis peak. Travel restrictions and social distancing norms have significantly affected the hotel industry across the world. With occupancy rates falling to decade lows, hotel stocks underperformed broader markets due to fears of a prolonged downturn. Given the likelihood of an early macroeconomic rebound with the release of Pfizer’s vaccine and the novel phenomenon of revenge tourism in 2021, the hotel industry stocks have observed strong gains this month. While the earnings of both companies are heavily dependent on low-risk franchise business, Trefis believes that Marriott stock has more room for growth considering the low current valuation multiple.

Our conclusion is based on our detailed dashboard analysis, Marriott International Looks Attractive Compared To Choice Hotels wherein we compare trends in key metrics for the two hotel companies over the years to determine their relative valuations under the current circumstances. We summarize parts of this analysis below.

Why Has Choice Hotels Outperformed Marriott Over Recent Months?

Choice Hotels’ EV/EBITDA based on 2019 earnings has declined from over 18x in 2019 to 17x currently, while Marriott’s multiple has declined from 17x to about 14x. The steeper decline in Marriott’s multiple can be attributed to a wider global presence and a larger long-term debt.

As both companies will benefit from a quick recovery in travel demand, their valuations recovered from multi-year lows in the past month. However, Marriott’s EV/EBITDA is around the same level seen at the end of 2018 – hinting that the stock still has room for growth. Thus, we believe that Marriott stock is a good pick even after the recent rally.

What if you’re looking for a more balanced portfolio instead? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!